Underinvestment poses greater systemic risk than overinvestment, says BP’s Dudley
BP CHIEF executive Bob Dudley has branded fears that the oil industry’s $1 trillion investments in oil and gas could be left stranded by a shift to lowcarbon energy as misguided.
The oil boss said campaigners calling for financial institutions to divest from oil and gas companies to avoid so-called “stranded assets” are underestimating the flexibility of oil companies.
The largest majors invest $100bn (£76bn) in fossil fuel projects every year, but could still adapt to a low-carbon world “in time” by reshaping their businesses “within a decade” and remaining financially resilient, he said.
“They are driven by good intentions, but my concern is that their suggested recommendations could lead to bad outcomes, particularly for some of the most vulnerable people in the world,” he told a London conference. “The first problem is it ignores the continuing contribution needed from oil and gas in this low-carbon energy transition,” he said. “I believe the more serious systemic risk comes from underinvestment in oil and gas exploration and production – not overinvestment,” he added.
Although renewable energy is growing faster than any other energy source in history, fossil fuels will still meet the majority of the world’s energy demand by 2040 and can still be consistent with climate change targets, he said. Official forecasts estimate renewable energy, such as wind and solar power, could meet around a third of the world’s energy demand in the coming decades.
“But we still need to meet the remaining two thirds of demand – and oil and gas have a crucial role to play. They can do that and be consistent with the Paris goals – so long as carbon capture usage and storage is deployed widely, especially in the power sector,” he added.
Separately yesterday, Royal Dutch Shell announced it has returned to the North Sea with its fourth investment this year to develop the Arran gas field, 149 miles east of Aberdeen.
The Anglo-Dutch energy giant sold off around £2.4bn worth of North Sea fields and assets in early 2017, but is making a series of careful new investments in the basin.
Bob Dudley said the largest majors could still adapt to a low-carbon world ‘in time’ by reshaping ‘within a decade’