Biden team’s hard sell on energy transition
One after another, top officials from the Biden administration popped up on oil and gas executives’ screens last week, extolling the tremendous opportunity that climate change presents.
Their stage was the annual CERAWeek by IHS Markit conference — held virtually this year, but still a see and be-seen event that attracted the biggest names in the energy industry. And not unlike officials from foreign nations who show up each year to sell executives on “exciting” new oil or gas fields, Biden administration officials were trying to convince attendees that technologies such as carbon capture and hydrogen energy mean there is a place for oil and gas companies in the administration’s plans for a clean energy future.
“It’s a heck of an economic opportunity,” prom
ised Energy Secretary Jennifer Granholm.
John Kerry, the U.S. special presidential envoy for climate, told the virtual audience, “I don't object to fossil fuels. I object to the byproducts,” specifically greenhouse gases.
The road show approach by the Biden administration marks the early stages of a generational effort to transform the U.S. economy, to virtually eliminate the greenhouse gas emissions that largely come from the burning of oil and other fossil fuels by midcentury.
On the campaign trail, now President Joe Biden said the United States needed to “transition” away from oil. But with the world getting about 80 percent of its energy through oil, natural gas and coal, the thinking is that not only will fossil fuels be around for a while yet, but the expertise oil and gas companies have built up over the past century will be essential in developing clean energy technologies such as geothermal and offshore wind, bringing them to a commercial scale and ultimately reducing emissions.
Dan Yergin, the energy historian who hosts CERAWeek each year, likened the Biden administration’s outreach to a meet and greet, but “on a very significant scale.”
“Energy transitions normally take centuries, and to try and do it in three decades is a very tall task,” he said. “This (conference) is a recognition of reality for all the participants. There’s not been much dialogue up until now.”
Kerry was scheduled to meet with oil executives Thursday, Yergin said. And throughout the week's conference, there were signs that the Biden team’s message was being relatively well received.
CEOs from companies including Royal Dutch Shell and Exxon Mobil have come under increasing pressure from investors to adapt their businesses and deal with climate change. During appearances at CERAWeek last week, they eagerly talked up efforts to develop clean energy technologies, while acknowledging their efforts were still early stages and much work was left to be done.
“Frankly, to do the job that’s required to help society get to net-zero, we’re going to need more advances,” said Exxon Mobil CEO Darren Woods. “We’ve been doing a lot of work trying to find technologies that allow us to move down that cost curve.”
After years of back and forth between the industry and government officials over the role of oil and gas in society, executives at large oil and gas companies have started to come around on the need to decarbonize their industry if they are to survive in the decades ahead.
“We start from the same place,” Aaron Padilla, manager of climate policy at the American Petroleum Institute, the industry’s largest trade group, said of the Biden team’s outreach. “Our industry and our companies have a long history of innovation and a significantly well-rounded set of expertise that they are bringing to reducing greenhouse gas emissions.”
Already, refining companies such as Valero Energy and Marathon Petroleum have begun shifting into low-carbon biofuels made from used cooking oil or tree trimmings to reduce their carbon footprints and take advantage of lucrative low-carbon fuel incentives in California and other states.
Oil and natural gas producers are expected to make similar shifts. Hydrogen, which is traditionally made from natural gas, is at the top of many experts’ lists as new lines of business for oil and gas companies, presuming they can figure out how to capture the carbon emissions from that process economically.
Likewise, there is renewed interest among oil executives in geothermal energy, which would employ the industry’s drilling expertise to burrow deep underground and use the heat of the planet’s inner core to boil water and generate electricity — like a subterranean power plant. Earlier last week, Chevron announced it was investing with the geothermal-focused investment firm Baseload Capital in Sweden, toward developing pilot projects in Iceland, Japan and the United States.
And then there is the prospect of capturing carbon from burning natural gas and other fossil fuels to produce materials like carbon fiber, which can be used in manufacturing products such as tires and boats.
“It really comes down to the commercial process, what does it cost. That’s where a lot of research and development is being focused by players in the oil and gas industry,” said Ken Medlock, an energy professor at Rice University. “If you can take the existing asset base and move it one step further in terms of how we refine the commodity in order to reduce emissions, you preserve the asset base.”