HOUSTON – As oil prices fall and concerns about climate change increase, BP, Royal Dutch Shell and other European energy companies are selling oil fields and planning to make major cuts in emissions and Invest billions in renewable energies.
American oil giants Chevron and Exxon Mobil are going in a completely different direction. They are doubling up on oil and natural gas and investing in innovative climate-focused measures like small nuclear power plants and devices that add up to pocket money Sucking carbon out of the air.
The inequality reflects the large differences in the way Europe and the United States approach it Climate changeA global threat that many scientists say will increase the frequency and severity of disasters such as forest fires and hurricanes. European heads of state and government have made combating climate change a top priority for President Trump called it a “joke” and has dismantled environmental regulations encourage the exploitation of fossil fuels.
With world leaders struggling to adopt coordinated and effective climate policies, the decisions made by oil companies, with their deep pockets, scientific skills, experience in managing large engineering projects and lobbying, can be of vital importance. What they do could help determine whether the world can achieve the goals of the Paris Agreement limit the rise in global temperatures to below 3.6 degrees Fahrenheit above pre-industrial levels.
Major American and European oil and gas companies publicly agree that climate change is a threat and that they must play a role in the kind of energy transition the world last saw during the industrial revolution. The urgency with which companies want to reshape their businesses couldn’t be more different.
“Despite rising emissions and societal demand for climate action, US oil companies are banking on a long-term future for oil and gas while the European majors are banking on a future as utility companies,” said David Goldwyn, a senior US State Department official in Utilities the Obama administration. “The way the market reacts to its strategies and the 2020 election results will determine whether either strategy works.”
For environmentalists and even some Wall Street investors, American oil giants are clearly making the wrong call. For example, in August Storebrand Asset Management, Norway’s largest private money manager, sold by Exxon Mobil and Chevron. And Larry Fink, who heads the world’s largest investment manager BlackRock, mentioned climate change “A critical factor in a company’s long-term prospects.”
In contrast, European oil managers have said that the fossil fuel age is declining and they plan to keep many of their reserves buried forever. They also argue that they need to protect their shareholders by preparing for a future where governments enact stricter environmental policies.
BP is the standard bearer for the strategy of rush and change. The company has announced that it will increase investments in low-carbon companies ten-fold to $ 5 billion a year over the next decade while reducing oil and gas production by 40 percent. Royal Dutch Shell, Eni from Italy, Total from France, Repsol from Spain and Equinor from Norway have set similar goals. Some of these companies have cut their dividends to invest in new energy.
BP attempted a transition in the late 1990s and early 2000s under the leadership of then chief executive John Browne, but financial results from renewable energy were disappointing and the company eventually dropped its nickname “Beyond Petroleum”.
In an interview, Mr Browne said it would be different this time. “There are a lot more voices now,” he said, adding that the Paris Agreement was a turning point, renewable energy economics have improved and investor pressure has increased.
This month, BP and Equinor announced a partnership for the construction and operation of wind projects along the coasts of New York and Massachusetts. The governors of these states want to reduce their reliance on natural gas and coal, which is supported by these efforts.
American oil executives say it would be foolish for them to switch to renewable energy, arguing that it is a low-profit business that utilities and alternative energy companies can do more effectively. They say it is only a matter of time before oil and gas prices recover when the pandemic subsides.
Right now, Exxon and Chevron are sticking to what they know best: shale drilling in the Permian Basin of Texas and New Mexico, deep-sea offshore production, and natural gas trading. In fact, Chevron is acquiring a smaller oil company, Noble Energy, to increase its reserves.
“Our strategy is not to follow the Europeans,” said Daniel Droog, Chevron’s vice president for energy transition. “Our strategy is to decarbonise our existing assets in the most cost-effective way and to consistently introduce new technologies and new forms of energy. However, we are not asking our investors to sacrifice returns or continue with three decades of uncertainty about dividends. “
Chevron says it is increasing its own use of renewable energy to run its operations. It is also said to reduce emissions of methane, a powerful greenhouse gas. And the company has invested more than $ 1.1 billion in various projects to sequester and lock carbon so it doesn’t get released into the atmosphere.
Venture capital arm Chevron Technology Ventures invests in new energy startups like Zap Energy, which are developing modular nuclear fusion reactors that do not emit greenhouse gases and limit radioactive waste. Another, carbon engineering, removes carbon dioxide from the atmosphere to convert it into fuel.
In total, Chevron Technology Ventures has two funds totaling $ 200 million, approximately 1 percent of the company’s capital and exploration budget last year. The company has a separate $ 100 million fund to support it a $ 1 billion investment consortium The aim is to reduce emissions in the oil and gas industry.
“We need breakthrough technology and my job is to find it,” said Barbara Burger, president of Chevron Technology Ventures, which employs 60 of Chevron’s 44,000 employees. “The transition is not an event on Tuesday at 11:59 am. It will be developed step by step and continuously over decades. “
Exxon has also largely turned away from renewable energies and instead invested in around a third of the world’s limited carbon capture capacity, which was so expensive and energy-intensive that few companies were willing to underwrite major projects.
Around $ 1 billion is spent on research and development annually. Much of this is attributable to the development of new energy technologies and efficiency improvements to reduce emissions.
One project is to channel carbon emitted from industrial plants into a fuel cell that can generate electricity. This should reduce emissions and at the same time increase energy production.
In a separate experiment, Exxon recently announced a “big step forward” with scientists from the University of California at Berkeley and the Lawrence Berkeley National Laboratory to develop materials that will help capture carbon dioxide from natural gas power plants with less heating and cooling than previous methods.
The company is too Working on algae trunks whose oils can produce biofuel for trucks and airplanes. The plants also absorb carbon through photosynthesis, which Exxon scientists are trying to speed up while producing more oil.
“Step 1, you have to do the science and it’s impossible to set a deadline for the discovery,” said Vijay Swarup, Exxon’s vice president of research and development.
Research on fusion, algae, and carbon sequestration has been done for decades, and many climate experts say these technologies could take decades to commercialize. Because of this, many scientists and environmentalists believe that American oil companies are not taking the fight against climate change seriously.
“Oil companies don’t do anything that puts them out of business,” said David Keith, a Harvard professor of applied physics who founded Carbon Engineering. “That’s not how the world works.”
However, some energy analysts argue that American oil companies are rightly in no rush to change their business. They argue that U.S. lawmakers simply haven’t given them enough incentive to make a radical break.
“If this is sunset time for oil and gas, someone forgot to tell consumers,” said Raoul LeBlanc, vice president of IHS Markit, a research and consultancy firm. He said while electric car sales may have picked up, it will take decades to replace the more than one billion internal combustion cars on the road.
It will likely take just as long, if not longer, to replace the large fleets of trucks, planes, and ships that run on fossil fuels. Exxon and Chevron should have sufficient oil demand for the next 30 to 40 years to use their reserves and make money, though profits will decline over time, said Dieter Helm, an Oxford economist who studies energy policy .
“Investors can invest in Tesla or any renewable energy or electricity company,” he said. “Why would an oil company with the skills for large-scale hydrocarbon development be able to compete against these new players?”
However, Mr Helm, who published the book “Burn Out: The Endgame for Fossil Fuels” in 2017, believes that all oil companies have a bleak future beyond the next few decades as technological advances in a world economy dominated by electricity make them overtake , Battery storage, three-dimensional printing, robotics and other breakthroughs. “These companies will die in the end.”
