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Sunday April 21, 2024

Oil executives talk down rapid shift to green energy as profits boom

By News Desk
March 24, 2024
A representational image of a renewable energy farm in California, USA. — AFP/File
A representational image of a renewable energy farm in California, USA. — AFP/File

Houston: Big Oil used an industry conference this week to argue against a rapid transition to green energy, as fossil fuel companies are emboldened by high demand and record profits despite rising alarm over climate change.

Executives attending the annual CERAWeek get-together in Houston expressed confidence that fossil fuel consumption would continue growing, just months after world leaders at the COP28 climate summit pledged to begin “transitioning away from fossil fuels” and triple the use of renewables by 2030.

“The environment right now is very positive for the oil and gas industry,” Alan Armstrong, chief executive of Williams, the biggest US gas pipeline company, told the Financial Times.

“Roll the clock back four or five years ago, they were like: ‘Oh, it’s all going to be renewables and batteries’ — and now they’re saying: ‘Wow, wow, this is going to be way too expensive.’”

The bullish comments at the event — which boasted a record attendance of more than 8,000 delegates — came against a backdrop of record temperature rises and growing scientific concern over the need to cut greenhouse gas emissions to tackle climate change.

The UN’s World Meteorological Organization this week sounded a “red alert” as it affirmed 2023 as having been the hottest year on record. It pointed to unprecedented surface and ocean temperatures, glacial retreat and rising sea levels. Jim Skea, head of the UN’s Intergovernmental Panel on Climate Change, told an FT conference last week the world was in “unknown territory”.

But industry leaders argue consumers are unwilling to pay the costs associated with a rapid shift to wind and solar energy. Booming construction of power-hungry artificial intelligence data centres, population increases and sweeping electrification mean increases in all forms of energy, except coal, are needed to meet demand, they said.

Executives attending the annual CERAWeek get-together in Houston were confident fossil fuel consumption will continue to grow © Reuters

Liam Mallon, head of ExxonMobil’s upstream business, said that the “brutal reality” was that the world was “not yet at a point where the big customers are willing to pay for the cost of this new energy and the consumers probably don’t really know the cost of it”.

“Until such time as there is a market-based economy and everyone understands the cost of it, consumers are paying more than they need to be paying for energy — simple, it’s not that complicated,” he said. “You can argue green all day and NGOs all day, but those are the facts. I think that message is beginning to resonate.”

Industry heavyweight Shell last week weakened its target for reducing carbon dioxide emissions. BP, which dialled back its own climate targets last year, touted the potential to grow its oil and gas operations in the US’s Permian Basin at the conference.

US oil and gas production have smashed fresh records in recent months and the country now pumps more than any other nation in history. Meanwhile, surging prices in the wake of Russia’s invasion of Ukraine have propelled producers across the world to report record profits in the past two years.

“We should abandon the fantasy of phasing out oil and gas and, instead, invest in them adequately reflecting realistic demand assumptions,” Amin Nasser, chief executive of Saudi Aramco, the world’s biggest oil producer, told delegates to the conference this week.

But some renewable executives at the conference hit back at the fossil fuel narrative.

Sandhya Ganapathy, head of EDP Renewables North America, called the statements by oil and gas executives a “limited” view of the role renewables will play in the future.

Mark Hutchinson, chief executive of Fortescue Energy, responded to the comments from Aramco’s Nasser by saying: “The fantasy is that the oil and gas industry think that by putting more emissions in the world, it gets better.

“You have the oil and gas industry baring their teeth . . . now the world knows these guys are never going to be part of the solution.”

Yet oil and gas executives pointed to the need for dependable electricity to feed the soaring power demand sparked by the proliferation of data centres needed for AI.

The International Energy Agency anticipates global power consumption from data centres could surpass 1,000 terawatt hours by 2026, more than double 2022 levels and an increase equivalent to Germany’s total power use in the space of four years.

“These great things that civilisation is doing, the innovation that we’re developing, depends on our industry to deliver them,” said Toby Rice, chief executive of EQT, the biggest US natural gas producer.

“When we’re talking about data centres, there’s not going to be: ‘Well let’s do wind and let’s do solar’ — this needs reliable, consistent power that can only be provided with hydrocarbons.”

Last year, the IEA predicted demand for oil and gas would peak before the end of the decade, a forecast that has been disputed by the Opec+ producers group and by many oil majors, who do not expect demand to peak until the 2030s or later.

The world is accelerating its deployment of renewables, adding 50 per cent more capacity in 2023 than the previous year, according to the IEA, with the faster growth expected in the next five years.

But the IEA faces a backlash from Big Oil and Republican supporters in the US Congress, with a group of lawmakers accusing the agency on Wednesday of adopting “misguided and troubling” positions on fossil fuels and straying from its core mission of promoting energy security.

A report released by Carbon Tracker this week found the world’s biggest oil and gas companies still not aligned with the goals of the Paris Agreement on tackling climate change, despite corporate messaging on supporting a low-carbon future.

Protesters outside the Houston event staged a mock “funeral march” as they blasted executives for pollution in Gulf communities and the industry’s contribution to climate change.

“Our dependency on fossil fuels has been harming and killing and causing suffering for communities and people for decades,” said James Hiatt, an activist from south-west Louisiana.

“We’re at the precipice where we have got to shift if we don’t want to inflict mass suffering on our children and their children.”