Oil majors vague on climate plans post Paris deal

BP, Shell, Statoil and Repsol say they’re supportive of plans to avoid dangerous warming, but show little sign of deviating from primary business plan

Fossil fuel companies have historically offered strong returns, attracting fund managers (Pic: BP)

Fossil fuel companies have historically offered strong returns, attracting fund managers (Pic: BP)

By Ed King

Oil majors keen to brand themselves as green leaders ahead of the Paris climate talks have toned down the rhetoric a month after agreement was reached at the COP21 talks.

In December 195 countries reached a consensus to radically cut greenhouse gas emissions by the second half of this century, signalling the slow but sure end of the fossil fuel era.

Governments also committed to moving trillions of dollars in future investments away from oil, gas and coal and into cleaner forms of power.

Representatives from four top oil producers contacted by Climate Home said they supported the new UN climate deal, but would not alter investment plans as a result.

Statoil’s strategy stays firm,” said spokesperson Elin Isaksen, adding the Norwegian multinational would “evaluate the potential consequences” of Paris.

“We subscribe to the underlying goal of COP21… that is limiting temperature rise to 2C,” said Spanish energy major Repsol’s Kristian Rix.

Officials at BP and Shell were at one in welcoming the agreement, secured after years of tough diplomacy, but offered little sign it would alter their long term business plans.

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The companies are among 10 responsible for nearly 20% of global oil and gas production that produced plans for an ‘Oil and Gas Climate Initiative’ in October 2015.

Together with Saudi Aramco, Sinopec, Pemex and Total they released proposals to cut rig flaring, methane leaks and make operations more efficient.

Critics branded the plans weak as the two-page document – signed by all CEOs – included few measurable targets or timelines for action. The signatories beg to differ.

“The initiative was launched because we felt issues needed to be addresses as soon as possible, and these are areas where we have expertise,” said Repsol’s Rix.

Repsol plans to share data and methodologies to make oil refining more efficient, said Rix, adding that regular meetings between the 10 top executives who signed the initiative would continue.

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An email exchange with BP spokesman Scott Dean shed little light on how the UK oil giant saw the initiative working. Companies would work “collaboratively… to evolve our businesses” he said.

Meanwhile Statoil’s Isaksen said curbing flaring, methane emissions and improving energy efficiency would continue to be priorities.

Still, despite the release of over 180 government climate investment plans needing trillions in clean energy backing, no oil major appears keen to break with their main game.

“Shell will continue to work with individual countries to help them deliver on their commitments,” said a spokesperson.

“We see natural gas, government-led carbon pricing mechanisms, CCS [carbon capture and storage], and the use of lower carbon fuels such biofuels and hydrogen, as necessary components in any practical response to address CO2 emissions.”

Repsol had a stake in floating wind turbines which are showing promise, said Rix, while Isaksen pointed to Statoil’s New Energy Solutions business, building on its offshore wind holdings.

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For BP, boosting gas at the expense of carbon-heavy coal is its green solution. Late last month BP CEO Bob Dudley said he could see the company’s reserves tilt heavily towards gas by 2020.

And despite signs of a slow shift away from fossil fuels, Richard Mallinson, a geopolitical analyst with consultancy Energy Aspects said most oil majors are still focused on their core business.

“I don’t think we have had any large companies making bold moves to shift away from hydrocarbons,” he said.

“There is research and teams looking at how they might leverage scale, expertise and assets they have in alternative energies, but the long term focus is one based on less gas flaring, fewer environmental risks and efficiency.”

Crashing oil prices mean there’s less pressure on companies or countries to move way from oil and gas, pointed out said Jonathan Stern from the Oxford Institute for Energy Studies.

“When oil and gas prices were at $100 a barrel you might have had to put money to renewables but nevertheless we could say fossil fuels will be expensive and it would be worthwhile. That argument is difficult to make now,” he said.

This week from Morgan Stanley oil expert Adam Longson suggested oil prices could dip further from their current $30 a barrel to $20.

Other analysts say prices could go as low as $10 a barrel, which would have knock-on impacts: Last year an estimated $200 billion of investments were postponed as a result of these slim margins.

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Still, most companies appear to dismiss the notion their assets could be stranded in the next decades as climate policies become progressively tighter.

Despite warnings from Bank of England chief Mark Carney the fossil fuel industry could precipitate a financial crash in the future, industry chiefs maintain their investments are sound.

Across the Atlantic Exxon-Mobil, which did not sign up to the climate initiative and which is hostile to carbon pricing, is bullish about the future.

“We don’t see any stranded assets… we think all our assets will be required,” spokesperson Alan Jeffers told the ClimateWire website.

That confidence could be dented if it looks like governments are serious about slashing emissions, said Energy Aspects’ Mallinson.

“Companies are looking at scenarios. 2018 could be the first [UN climate plan] review and if that sees a serious tightening of climate policies we could see companies making more radical decisions.”

But so far – and it’s early days – there’s little in the way of policy or financing that suggests a major shift away from business as usual, warned Stern.

“I think there has been a deafening silence over the last few weeks in terms of governments doing and in part spending money [on green goods],” he said.

“I’m looking at a lot of Asian countries that are building coal plants… and I’m waiting to see fundamental changes in policy and spending that is serious… we’re talking tens of billions on low carbon energy.

“But it has only been a few weeks [since Paris]. There’s plenty of time.”

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