A Chance for the Oil & Gas Industry to Regroup
International Petroleum (IP) Week, the London gathering of the great and good in the oil and gas sector organized by the UK Energy Institute, seems like a very long time ago. How the industry was getting on transitioning to a low carbon economy took front and center stage at the event but coronovirus, or Covid-19, as we are now calling the virus, was the elephant in the room. Predictably enough we missed the Chinese delegation this year but plenty of Italian and Spanish oil folk were traveling. The virus was a threat but containable.
Would IP Week have taken place if it had been scheduled for the end of March rather than February? Almost certainly not. Other industry events are getting postponed or canceled one by one and while not in complete lockdown the sector has moved to tick-over mode.
Positives? More oil is being pumped as producers fight for market share – but carbon emissions are lower than for a very long time as users cut back. In February, for example, China’s state-owned refiners announced a cut in refining throughput of nearly a million barrels a day. Major ports such as Shanghai and Shenzhen reported a 20% decline in trade for the same month as labor shortages caused by the virus started to bite.
At IP Week this year, Matt Haddon of the sustainability firm ERM talked about “an old economy, new economy thing.” Low carbon priorities, argued Haddon, were producing “the most urgent structural shift that the sector has seen for decades.” Oil and gas majors were having to rethink their roadmap and energy provision in all its many forms was very much on the agenda.
With the oil price currently down below $30 a barrel will transition among the majors continue? What can we expect when BP CEO Bernard Looney sets out how the company is going to get to net zero carbon by 2050? The answer, I suspect, is careful, measured progress in a new economy not only shaped by climate change but by the virus and by other nasty bugs which may follow. BP for one is now the world’s largest investor in solar energy. Shell is involved in the world’s largest pilot project for producing green hydrogen. Equinor believes it can achieve carbon neutrality as early as 2030.
These are strange times but they are times when the industry has a chance to regroup – despite the spat between OPEC and Russia. The global economy may be sick for the moment but this particular patient can prepare for its recovery.