When I started my career in the oil industry more than 50 years ago, nearly three-quarters of people around the world lived in extreme poverty. Today, that figure stands at less than 10 percent. Fossil fuels are one of the reasons for this progress. So I was shocked to read an article recently that talked about oil and gas in the same breath as tobacco and arms manufacturers. It described fossil fuels as a “controversial sector”. This was shocking, but not altogether surprising. It reflects a conundrum we must all face.
On the one hand, coal, oil and gas have provided the fuel to power civilization. On the other hand, they risk destroying civilization if we don’t reduce their impact on the environment. Society cannot prosper without energy, but the energy industry cannot prosper if its customers feel increasingly uneasy about using its products and if a growing number of investors are shunning the sector. For the oil and gas industry, this is a crisis in the making. This is largely to do with climate change, which, thanks to a growing number of extreme weather events, no longer appears just a remote phenomenon.
Against this backdrop, alternatives to fossil fuels have become more efficient and widespread — but they are likely to account for just 15 percent of the energy mix by 2040, compared with 10 percent today. As the world around it has changed, the oil and gas industry has too often been on the wrong side of the argument, and on the wrong side of history. In 1997, for example, when BP became the first supermajor to acknowledge the threat posed by climate change, other companies accused us of “leaving the church”. Over time, they reversed their position, but the public has a long memory. Today, oil and gas companies are still failing to keep up with the pace of change.
In November, the US state of Washington held a vote on the introduction of a statewide carbon tax. While most energy supermajors publicly support a carbon tax as the only measure that can bring down global emissions, some of them spent many millions campaigning against it. People always remember when a company appears to say one thing while doing another. There are three ways in which the industry can start to do better. First, it is time to set a serious ambition: the “decarbonization of hydrocarbons”. Carbon capture and storage has been tried many times, but it has not yet been shown to be commercially viable.
The same used to be true of wind and solar power, but the right combination of innovative engineering, private investment and public support proved to be transformational. We must now do the same for CCS. This is not a delaying tactic on the part of an incumbent hydrocarbon lobby — it is an urgent priority. Second, oil and gas companies should redouble their efforts to attract and retain the best people. Ask any young person today where they would like to work and they are likely to choose Silicon Valley over the Permian Basin. For a sector that prides itself on operating at the cutting edge, this is a problem.