As renewable energy garners steam and fossil fuels become less dominant, the industry is looking at technological advances in other energy sources as executives combat carbon emissions over climate change concerns. In its annual energy outlook, BP expects oil demand to peak in the next two decades as renewable energy grows and consumers purchase hundreds of millions of electric vehicles.
Renewable energy and climate change concerns dominated the recent IHS Markit CERAWeek. Royal Dutch Shell's CEO Ben van Beurden stated the biggest issue that faces the industry, in his mind, is climate change.
"And there may not be total unity anymore behind the Paris Agreement, but there is no other issue with the potential to totally disrupt our industry on such a deep and fundamental level as climate change," he said.
Secretary of Energy Rick Perry touted American energy independence, proclaiming President Trump's executive order promoting energy independence and economic growth, released in March, as the "start of a new era in American energy and production and job creation." He added the goal is to "restore economic freedom and allow our companies and our workers to thrive, compete and succeed on a level playing field."
van Beurden said it's not about abandoning oil and gas -- since there will always be a global need, in his view -- but instead finding business opportunities during the inevitable changes that will arise.
"If society is to meet the ends of Paris, we believe that society will have to stop adding greenhouse gases to the atmosphere by 2070," he said. "This means we will aim to bring down the net carbon footprint of our energy products by 2050 -- about 50-percent fewer greenhouse gases per unit of energy used by our customers and 20-percent less by 2035. This not just covers carbon emissions from our own operations but also those produced by our customers when they use the energy products that we sell to them."
However, the White House argues its energy policies can be good for the environment in the long term. "Over the past year, President Trump and his administration have brought this realistic view to Washington, and we're seeing the benefits: cut taxes, reduced regulation by historic numbers, putting Washington squarely on the side of innovation and investors," Perry said. "We don't have to choose between growing our economy and caring for our environment. By embracing innovation over regulation, we can benefit both, and that is at the heart of the new energy realism."
van Beurden emphasized the biggest challenge in reducing emissions is not in production but in the products sold. "We do still need to address the operational emissions, and we will, but the ambition goes far beyond just improving the energy efficiency of our assets," he said. "Greenhouse gases associated with each unit of energy are less than 15 percent. The rest comes from customers using it, because what matters in the end is the effect that we have on the world, and most of that is done through the products that our customers rely on to live their day-to-day lives."
He added to become an excellent investment case starts with discipline in capex and operational expenditures, a program of divestments, the high grading of portfolios and ramping up new profitable projects. Achieving financial success will propel the company to strive for a lower-carbon future because, in his view, the two are "inseparable."
"We have to thrive as a business as the world's energy system changes by being both financially and environmentally sound -- not by abandoning oil and gas the world will still need, but by finding business opportunities in the changes that will inevitably take place," said van Beurden. "It is about making excellent returns by doing the right things, selling the right things and by being in step with society."
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