Oil companies split over rigorous climate solution

The leaders of ten of the biggest, global oil companies have offered their qualified support for a new global treaty on climate change, stating, in a written declaration, that they share the ambition to limit global warming to 2 degrees C. The Oil and Gas Climate Initiative, (OGCI) as the group calls itself, comprises a wide international mix: Britain’s BP and BG Group, Shell, Saudi Aramco, Total, Statoil of Norway, Italy’s ENI, Repsol of Spain, India’s Reliance Industries, and the Mexican company, Pemex.

Their recent meeting, held in Paris, on October the 16th, revealed their intention to collaborate and inspire their industry to do more to combat global climate change, and the group signed a declaration which called for “an effective climate change agreement” at COP-21 in December. Their statement also acknowledged that the existing trend of the world’s net greenhouse gas emissions is not consistent with the aim of a 2 degree C future.

The companies asserted that that they would make their own production operations more efficient, vowing to collaborate to limit gas flaring from their refineries, whilst reducing methane that escapes from oil and gas installations. They claimed that they had, in fact, already reduced their emissions by 20% over the past decade. They also promised to promote natural gas as a better option than coal, and invest in carbon capture and storage, as well as renewable energy. The OGCI further promised to work with car makers and consumers to improve vehicle fuel economy.

However, notable by their absence at the Paris gathering were American companies, especially Chevron and Exxon Mobil. These oil majors seem to disapprove of the European-led initiative, as the potential remedies, such as carbon taxes or the trading of carbon-emission permits, which are deemed necessary to curb greenhouse gases, would almost certainly result in raising the price of their fuels. The CEO of ExxonMobil, Rex W. Tillerson, has often said that he would support putting a high price on carbon, as long as it was “revenue neutral”. Significantly, OGCI’s official declaration omitted mention of a high carbon price, presumably to retain their hopes of getting the American companies “to eventually come on board”.

A major criticism of the OGCI’s declaration was that it did not commit to any new limits on their own activities, preferring instead to follow rules and regulations set by governments. There was no move to be “one step ahead” of them. The OGCI’s declaration did, however, note that governments face a tough, dual challenge of allowing energy supply to grow as needed, whilst, at the same time, lowering emissions.

However, the OGCI is in its early days, and creating a spirit of collaboration, amongst normally competitive companies. Several of these companies are facing up to new realities, and changing the way they do business, with Shell and Total, in particular, becoming more gas-oriented. The oil industry may have ‘been in denial’ for years over climate change, but this Paris meeting was ground-breaking indeed, as the OGCI talked about partnerships and multi-stakeholder initiatives to accelerate climate change solutions.

Environmentalists mocked the Paris Initiative, claiming that “arsonists do not make good firefighters”, but one should remember that the UN’s COP-21 Summit is only going ahead thanks to sponsorship from fossil fuel companies, and the OGCI proves that oil majors have recognised that their future survival and development is linked with the climate battle, and adapting to the new challenges that lie ahead.

Peter Whiley, specialist Grupa LOTOS S.A.