Transition from fossil fuels led WPC talks
Six years after world leaders meeting in Paris agreed to rapidly reduce greenhouse gas emissions in an attempt to avoid the most cataclysmic consequences of climate change, disruptions in global energy markets are drawing scrutiny on how government officials and the private sector are managing the transition from fossil fuels.
Oil and natural gas prices, already at their highest level in years as COVID-19 restrictions lift, could be headed much higher, as oil executives and government officials warn of a chronic underinvestment in the industry at the same time that clean energy fails to expand fast enough to meet global needs.
At the World Petroleum Congress in Houston, there was growing concern among attendees that a recent shift by investors away from fossil fuels could lead to supply shortages and skyrocketing energy prices, costing consumers more and slowing the nation’s economic recovery from the pandemic. The recent spike in oil and gas prices is a case in point, they say, as lagging production following recent oil busts can’t keep up with the sharp rise in demand for energy.
“There’s this sense of demand stagnation because of the energy
transition,” said ConocoPhillips CEO Ryan Lance. “There’s this big uncertainty around what the demand trajectory is going to look like for this business, and that’s creating some uncertainty in the business. We all know that uncertainty leads to reduced capital investment.”
Exxon, Chevron’s chiefs double down on need for oil, gas
The chief executives of the two largest U.S. oil companies reiterated their beliefs that the world will continue to rely on fossil fuels for years to come, even as society shifts toward cleaner forms of energy.
Exxon Mobil CEO Darren Woods and Chevron CEO Mike Wirth told thousands of attendees that they shared the world’s concerns about climate change and touted their goals and
efforts to reduce their carbon emissions. Woods and Wirth, however, said they believe oil and natural gas will remain the world’s choice for affordable and reliable energy for decades.
“The fact remains that under most critical scenarios, including netzero pathways, oil and natural gas will continue to play a significant role in meeting society’s needs,” Woods said.
“Our products make the world run, and we can make it run even better,” Wirth said.
Energy transition won’t be quick, expert warns
Daniel Yergin, the preeminent energy expert, has a warning for those who expect the energy transition to be quick: It won’t be.
“We’re trying to do it in a very short period of time,” Yergin said. “All other energy transitions happened over a long time.”
For example, while North America’s first oil wells came online in 1859, it took until the 1960s for petroleum to overtake coal as the world’s No. 1 energy source, Yergin said.
There is a lot of rhetoric surrounding the speed of the coming energy transition, but, Yergin said, investment and certain supply chains necessary to reach net zero carbon goals are insufficient.
Carbon capture seen as critical for Big Oil’s goals
Oil executives outlined their case for carbon capture as a key way to reduce greenhouse gas emissions from the industry and keep fossil fuels viable in a low-carbon future.
Companies, including Exxon and Houstonbased Occidental Petroleum, are investing in carbon capture projects as public and investor pressures mount over climate change. While many European oil majors are responding to climate risks by shifting investments from fossil fuels to wind and solar power, American oil giants are investing in carbon capture and storage facilities.
Biden official stresses need for ‘affordable’ shift
World leaders need to find a way to keep energy costs down as they transition to clean energy if they are to maintain public support for efforts to combat climate change, said Deputy Energy Secretary David Turk.
Reducing costs on new technologies, as well as maintaining prices on existing energy sources, would be critical in shifting the world from fossil fuels.
“The lower the price the easier it is for technology to get to scale,” he said. “There’s not going to be the political support if we have big increases in energy prices.”
‘Clean energy’ in developing world means natural gas
In India, government officials use the term “clean energy” to describe building LNG terminals and pipelines so households don’t have to burn wood or cow dung. In Nigeria, clean energy means developing offshore natural gas fields, instead of capping them and moving on to search for oil.
For all the discussion in the United States and Europe about reducing reliance on natural gas to get to net-zero greenhouse gas emissions, much of the rest of the world views gas as a critical vehicle to meet their climate targets.
Egyptian oil minister Tarek El-Molla listed one natural gas project after another as sign of his country’s commitment to reducing emissions, including switching oil-burning power plants to gas and pushing vehicles that run on compressed natural gas.
Executives warn of rare-earth mineral imbalance
Executive Chairman Charif Souki of Tellurian’s LNG company and Jim Teague, co-CEO of Houston pipeline company Enterprise Products Partners discussed the near domination that China has in rare-earth minerals and urged the U.S. to take action.
It would require greater investment, something energy companies have shown a reluctance for in recent years. The industry has cut spending on new projects under pressure from shareholders to deliver higher profits. Investors, eyeing the energy transition, are reluctant to sink more money in projects that could become obsolete before they pay off.
Maynard Holt and Bobby Tudor bid adieu to the investment bank they co-founded.