Bal­anc­ing act for top tier com­pa­nies

Car­bon re­search is an al­ter­na­tive play for the ‘ su­per­ma­jors’ in the pe­tro­leum in­dus­try which have ben­e­fited from high oil prices, writes Mike Hanley

The Weekend Australian - Review - - Clean Energy -

WHEN oil prices slumped to around $ 30 a bar­rel in the mid- 1990s, oil com­pa­nies con­sol­i­dated. Now, glob­ally, there are just six ‘‘ su­per­ma­jors’’ that dom­i­nate the in­dus­try, and all are sit­ting on enor­mous re­serves for which they are re­ceiv­ing more than $ 100 a bar­rel. It is a li­cence to print money.

But it’s the same kind of li­cence the to­bacco com­pa­nies had in the late 20th cen­tury: lim­ited. Like pack- a- day smok­ers, we know we are ad­dicted to oil — even Pres­i­dent Bush has said so. But we also know it is killing us.

With cli­mate change here now, the su­per­ma­jors are in a tricky po­si­tion — they have to max­imise prof­itabil­ity to­day with­out jeop­ar­dis­ing their ex­is­tence to­mor­row. It is a com­plex strate­gic bal­anc­ing act — to be seen to be do­ing some­thing about cli­mate change, with­out un­der­min­ing their main prod­uct. Some make a bet­ter fist of it than oth­ers. BP and Shell in par­tic­u­lar have made sig­nif­i­cant strate­gic de­ci­sions to sup­port lim­it­ing car­bon emis­sions, in­clud­ing in­vest­ing bil­lions in low- car­bon tech­nolo­gies and al­ter­na­tive en­er­gies. Other su­per­ma­jors have been less proac­tive, but have at least mostly stopped deny­ing that cli­mate change is an is­sue. Even Exxon, once a no­to­ri­ous cli­mate change de­nier, now in­vests in car­bon change re­search.

At the be­gin­ning of 2008 Jeroen van der Veer, the chief ex­ec­u­tive of Royal Dutch/ Shell, wrote to all 112,000 em­ploy­ees across the globe to in­tro­duce them to two sce­nar­ios the com­pany had come up with to de­scribe two pos­si­ble fu­tures to 2100.

The two sce­nar­ios de­scribe very dif­fer­ent worlds: one op­ti­mistic, the other, not so much.

Un­der ‘‘ Scram­ble’’, coun­tries com­pete for en­ergy sup­plies, ig­nor­ing the sirens of cli­mate change, un­til it is too late — en­ergy sup­plies be­gin to run out, prices are sky high, there are huge cli­mate change- in­duced shocks, and the global econ­omy is plunged into un­cer­tainty.

The more op­ti­mistic sce­nario, ‘‘ Blue­print’’, is the one Shell is hop­ing for, writes van der Veer. Un­der Blue­print, lo­cal in­no­va­tion in car­bon ef­fi­ciency leads to en­light­ened na­tional pol­i­cy­mak­ing — car­bon trad­ing sys­tems, for in­stance — and in­ter­na­tional co- op­er­a­tion on th­ese poli­cies.

Blue­print means a more or­derly world, and a lower car­bon one.

Blue­print, as mod­elled by the Mas­sachusetts In­sti­tute of Tech­nol­ogy for Shell, as­sumes that CO is cap­tured at 90 per cent of all coal- and

2 gas- fired power plants in de­vel­oped coun­tries in 2050, plus at least 50 per cent of those in non- OECD coun­tries. To­day there are none. ‘‘ Since CO cap­ture

2 and stor­age adds costs and brings no rev­enues, gov­ern­ment sup­port is needed to make it hap­pen,’’ says van der Veer.

In Aus­tralia at least, gov­ern­ment is pro­vid­ing sig­nif­i­cant sup­port for car­bon se­ques­tra­tion — and that is where Shell is putting its al­ter­na­tive en­er­gies in this coun­try.

The com­pany is work­ing on four dif­fer­ent car­bon se­ques­tra­tion projects, in­clud­ing a Chevron- op­er­ated Gor­gon project in West­ern Aus­tralia which has claimed $ 60 mil­lion of the gov­ern­ment’s Low Emis­sion Tech­nol­ogy Demon­stra­tion Fund.

The com­pany is also pro­vid­ing money, re­search and peo­ple to the ZeroGen black coal zero emis­sions project in Queens­land, brown coals re­search at Monash Univer­sity, and a CO Co- oper­a­tive Re­search Cen­tre at the

2 Ot­way gas project in Vic­to­ria.

In Aus­tralia, Shell lim­its its al­ter­na­tive en­ergy ac­tiv­i­ties to cap­tur­ing car­bon and bury­ing it, but over­seas it in­vests heav­ily in bio­fu­els. It re­cently an­nounced a joint ven­ture with Virent, a Wis­con­sin- based com­pany, to con­vert plant sug­ars di­rectly into petrol rather than ethanol. Ac­cord­ing to Shell Aus­tralia’s web­site, the com­pany will bring al­ter­na­tive en­er­gies to Aus­tralia when it sees com­mer­cial po­ten­tial for them.

BP made a big show of re­brand­ing it­self ‘‘ be­yond pe­tro­leum’’ in 2000. Since then it has in­vested some $ US8 bil­lion ($ 7.4 bil­lion) in al­ter­na­tive en­er­gies, and two years ago brought its wind, so­lar, hy­dro­gen and gas low- emis­sions tech­nolo­gies un­der one al­ter­na­tive en­ergy ban­ner. It has pledged to in­vest $ US1.5 bil­lion this year alone, and to elim­i­nate 24 mil­lion tonnes of CO by 2015, equiv­a­lent to mak­ing 6

2 mil­lion cars car­bon free.

In Aus­tralia, BP’s al­ter­na­tive en­ergy ac­tiv­i­ties are lim­ited to so­lar and a hy­dro­gen project in West­ern Aus­tralia. But it is big in so­lar: BP is the only do­mes­tic man­u­fac­turer of pho­to­voltaic cells and pan­els. Its sub­sidiary, BP So­lar, has a man­u­fac­tur­ing plant in Home­bush which em­ploys 250 peo­ple man­u­fac­tur­ing 50MW of so­lar ca­pac­ity a year. It ex­ports 85 per cent of pro­duc­tion, as well as hav­ing a strong foothold in Aus­tralia’s 10MW do­mes­tic mar­ket for so­lar en­ergy.

‘‘ BP has been in so­lar en­ergy for over 30 years,’’ says Brooke Miller, Re­gional Di­rec­tor of BP So­lar for Aus­tralia, ‘‘ so it’s a long term in­vest­ment. Many of the oil ma­jors have an in­ter­est in so­lar, but we are the only com­mer­cial man­u­fac­turer of pho­to­voltaics in Aus­tralia. We have a strong part­ner­ship with the Univer­sity of NSW, where a lot of the knowl­edge about pho­to­voltaic en­ergy re­sides, and it makes big sense for the com­pany.’’

The com­pany is in­volved in the $ 75 mil­lion gov­ern­ment- spon­sored ‘‘ So­lar City’’ project, which sub­sidises the pur­chase and in­stal­la­tion of so­lar sys­tems for par­tic­u­lar com­mu­ni­ties around the coun­try. In Ade­laide, for in­stance, a part­ner­ship be­tween BP So­lar and the ANZ bank brings the cost of a $ 15,000 6.4KWh/ day so­lar sys­tem down to about $ 8,000.

BP and Shell are at the fore­front of al­ter­na­tive en­ergy in­vest­ment in Aus­tralia as well as glob­ally. The other oil su­per­ma­jors ma­jors have lit­tle or no al­ter­na­tive en­ergy in­vest­ment in Aus­tralia, but this may change in the near fu­ture with the Rudd gov­ern­ment’s rat­i­fi­ca­tion of the Ky­oto pro­to­col, and en­thu­si­asm for clean en­ergy in­cen­tives.

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