Execs call for change as climate, tech fears threaten industry
Top leaders believe urgent action is needed in response to global ‘crisis of confidence’
HOUSTON— Some of the world’s top oil executives plan a call to action at a premier industry conference this week, arguing that companies need to actively address climate change and technology concerns that are scaring investors away.
Rising climate activism, new technology and investor unrest have chastened and divided the global energy industry, a development set to define the CERAWeek by IHS conference, an annual gathering here that is usually dominated by a fullthroated defense of fossil fuels.
The industry is facing a “crisis of confidence,” Eldar Saetre, chief executive of Norwegian energy giant Equinor ASA, is expected to say in a speech Monday. BP PLC Chief Executive Bob Dudley is similarly planning in a Tuesday evening speech to call for the industry to do more to respond to new demands for climate action, even as energy use continues to rise.
“We need to drive this as an industry, to be part of the solution and not be dragged into a low-carbon future,” Mr. Saetre said in an interview Sunday. While there are some “good efforts” to bring about change, he said, “there is definitely denial within companies and in boardrooms, as well as ignorance and an unwillingness to act.”
Mr. Dudley, BP’s chief executive, is set to deliver a warning about eroding trust, suggesting a “progressive but pragmatic” approach to providing more energy while reducing emissions, according to people familiar with his remarks.
Mr. Saetre and Mr. Dudley both see more engagement with critics and young people as essential in response to anger and frustration about climate inaction.
Many oil-and-gas companies have been battered by investors in recent years because of volatile swings in prices. Energy stocks made up less than 6% of the S&P 500 at the end of last year, compared with about 15% a decade ago. The price swings and inconsistent performance in some business units, particularly in U.S. shale, have pushed some shareholders out of the sector.
Meanwhile aggressive government proposals to deal with climate change, such as the Green New Deal floated by liberal Democrats in the U.S., threaten to upend the energy business, even if the ideas, for now, appear slow to gain political traction.
The impact of growing pressure on the industry has become more apparent this year, including last week, when Norway’s $1 trillion sovereignwealth fund said it planned to sell off many smaller oil companies because of the risk of permanently lower crude prices.
The fund will continue to hold billions of dollars in shares of many of the world’s largest oil companies, including Exxon Mobil Corp. and Royal Dutch Shell PLC, although it will pressure those operators to diversify their business beyond oil.
There are questions about the future of oil-demand growth because of increasing regulations tied to climate, electric cars and other technologies. Some companies and forecasters see demand peaking in as soon as a decade; others only see modest increases continuing through at least 2040.
While those with bullish predictions may be proven right, many investors are holding off because of uncertainty about the future, said Amy Myers Jaffe, an energy fellow at the Council on Foreign Relations. New technologies such as elec- tric vehicles, plastics recycling or even a rise in 3-D printing are leading to major uncertainty, she said.
“The industry is under tremendous pressure,” said Ms. Jaffe, who recently published a paper about climate risks to fossil fuel companies. “Companies that are showing greater resilience and an increased ability to respond to these risks are performing better.”
BP recently agreed to share with investors how it plans to align its business strategy with the emission-reduction targets struck by almost 200 countries in the Paris climate agreement. The Trump administration withdrew from the accord in 2017.
While many large oil companies have set emission-reduction targets and expressed support for the Paris accords, most continue to defend increasing investments in oil and gas. More fossil fuels will be needed to meet the world’s growing energy demand, the companies say.
The U.S. and European companies, as well as oil-producing countries from Saudi Arabia to Russia, continue to differ in messaging and approach on how to reduce emissions while increasing energy production.
Last week, Exxon unveiled plans to spend about $220 billion to 2025 on a set of projects that may boost oil-and-gas production to more than 5 million barrels a day, up 25% from today. Chief Executive Darren Woods said the company is making the right decision to invest more at a time when others appear to be retreating.
“Society needs us to make these investments,” he said.