Climate Emergency Dominates London’s Oil Week

LONDON—Addressing the issue of climate change stood at the forefront for many oil and gas executives during the International Petroleum (IP) Week conference, held Feb. 25-27 by London-based Energy Institute.

While such topics have featured on the agenda at energy conferences for some time, the way climate dominated the first day of this year’s IP Week discussions illustrated the increasing sense of urgency among the oil and gas industry in addressing the issue. It was clear from discussions that a number of challenges stand in the way, and some remain skeptical over the industry’s ability to turn words into action.

Nonetheless, speakers—who included oil industry executives as well as climate experts and environmental advocacy groups—urged delegates to take the lead in addressing what was frequently described as a climate emergency or crisis. Discussions centered on an urgent need to reduce greenhouse gas (GHG) emissions, and came against the backdrop of an oil market so oversupplied that crude prices have stayed low despite a number of supply shocks in recent months. 

“Despite all of these major incidents, oil prices didn’t change much,” the International Energy Agency’s (IEA) executive director, Fatih Birol, told delegates on Feb. 25.

Examples cited include plummeting crude production in Venezuela, the collapse of Iranian oil exports due to sanctions, the attack on Saudi Arabian oil facilities, the killing of an Iranian major general and outages in Libya as a result of civil war. Birol said any one of these events alone would have led to oil prices skyrocketing only a few years ago. Meanwhile, demand is also muted, with Birol mentioning the coronavirus outbreak among factors adding to further downward pressure on crude prices.

This pricing pressure is increasingly combined with pressure to decarbonize and adopt various other environmental, social and governance (ESG) goals. Birol noted a need to treat energy production as separate from GHG emissions.

“Energy is a good thing—emissions are a bad thing,” he said. “We need to distinguish between these two things.”

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Birol expects the world to still need oil and gas for years to come. However, he added that the industry needed to find the right balance and “clean up” oil and gas output.

The IEA recently reported energy-related CO₂ emissions stayed flat in 2019, contrary to expectations. Birol said this has been attributed to three major trends: the strong growth of renewables, natural gas replacing coal power and an increase in nuclear generation. The IEA’s job now, according to Birol, is to lead efforts to reduce emissions further, so that the 2019 figure represents a peak, rather than a pause before they rise again.

Under current, legally enacted policies, the IEA expects emissions to continue rising, with global temperatures growing by 4 C (39 F), “which would have catastrophic implications for all of us,” Birol said. Under policies in the works but not yet enacted are implemented then emissions may remain at where they are today, but under this scenario, temperatures will still rise by 3 C (37 F), he added.

In order to contain the rise in temperatures, Birol said emissions have to be brought down. He outlined three major areas on which efforts can be focused: efficiency, renewables and other clean energy technologies.

Birol went on to say that carbon capture and storage (CCS) was, in his view, one of the most critical technologies involved. This was echoed by other speakers, who called for more investment into CCS.

However, the Church Commissioners of England’s head of responsible investment, Edward Mason, said he was tired of hearing about CCS but not seeing it backed up by action.

“If it’s going to be part of the solution, it needs to happen pretty soon,” he told the conference. “And I think the industry needs to look itself in the mirror a bit on this, because what it needs is a carbon price, and you’ve been too busy resisting a carbon price or not advocating sufficiently strongly for it.”

Industry resistance was also later brought up as a challenge that still needed to be addressed. Ed Williams, president and CEO of communications firm Edelman for Europe, Middle East and Africa (EMEA), said that while change abounds in the industry, it is largely being driven by external pressure.

“Whilst that may be OK for now, I believe it’s not the right approach forever,” Williams said. Pressure from citizens and activists, spurred by their awakening to the climate emergency, is not going away, he added.

Some oil and gas companies are now trying to demonstrate that they are taking the lead on climate and other ESG issues. London-listed supermajor BP Plc recently unveiled plans for a 2050 target for net-zero emissions.BP joined a handful of other—mainly European—energy firms in adopting the net-zero emissions goal. Mason noted that investor expectations across all sectors are “really coalescing around net-zero 2050.” He said the Church Commissioner, which manages an £8.3 billion (US$10.8 billion) investment fund, would push for all companies to embrace net-zero goals.

Bob Ward, the policy and communications director at the London School of Economics’ Grantham Research Institute on Climate Change and the Environment, said that the net-zero target was “essential” to meeting climate change limitation goals under the Paris Agreement.

The challenges are considerable, but Birol suggested another starting point.

According to the IEA, majors and national oil companies (NOCs) around the world still invest 99% in oil and gas, and only 1% into clean energy and noncore businesses. “There is substantial room to improve to be qualified to say that we are investing in both domains,” Birol said.

The consensus among the speakers was that the science of climate change was beyond doubt at this point. However, for the energy industry to succeed in mitigating climate change, consensus and collaboration on how to proceed are still needed.