Shell CEO Ben van Beurden told the Oil & Money Conference in London on Tuesday that the oil sector’s cost challenge may pale in comparison to the challenge of “moving to a low-carbon future”
In doing so, he re-iterated his call for a carbon pricing system which is opposed by his US super-major counterparts, particularly ExxonMobil, whose CEO Rex Tillerson said consumers would never accept as it inevitably means higher electricity prices.
However, he offered a more philosophical, if even downright negative, tone on renewables.
Having scaled up Big Oil’s war on coal by pushing the United Nations to back a global, linked carbon pricing system, earlier this year with Europe’s other oil majors, van Beurden now appears to have turned his sights on renewables, pushing oil and gas as the solution to the world’s carbon problems, at least for the foreseeable future.
As Shell weighs how to balance growing energy demand with the need to make a transition to a cleaner energy future, van Beurden was adamant that “we will still need hydrocarbons for decades to come”
“I know that some people would like fossil fuels to be replaced by renewables as we speak; but for technical and economic reasons, this can only happen step by step – and it will not happen across the board,” he said.
“Sectors like heavy industry, heavy duty transport and chemicals need carbon to operate. And the resource base of the other large source for carbon – biomass – is insufficient to meet their demand … if we consider only that portion of biomass that doesn’t compete with food.
“This means that sectors like these will continue to need hydrocarbons. The upshot of all of this, by the way, is that hydrocarbon assets will keep their value.
While he agrees with others’ belief that technology will solve the problem in the end, he emphasised that in the oil and gas game it’s also about efficiency, which is why he says carbon capture and storage is required to clean up the use of fossil fuels.
“Unfortunately, however, we can no longer wait for CCS technologies to mature slowly. The world needs to start applying them widely and without delay,” he said.
“In my view, the issue is essentially about finding economic ways to invest in an energy transition,” he said.
“This is why governments should take the opportunity to put a price on carbon. By taking the costs of tackling climate change and air pollution into account, carbon pricing systems will drive the right behaviour of consumers and producers.”
He said effective carbon pricing systems would boost technologies like CCS – although he warned that more was needed to make CCS a success – and would also level the playing field for renewables, and for natural gas, against coal.
“Gas is a fossil fuel, yes, but a crucial one for building a low-carbon future,” he said.
“When burnt for power, gas produces around half the CO2 and one-tenth of air pollutants that coal does. A switch from coal to gas in power plants improves air quality today and helps deliver a sustainable energy system tomorrow – together with renewables.
“In short, carbon pricing systems encourage the quickest and most efficient ways of reducing emissions widely. Unfortunately, there are concerns that overall energy costs would increase.
“These worries suggest a risk that emerging economies will not take part in them. Eventually, this would be bad news for everybody – including our industry.”
He cited British Columbia’s tax on carbon as “revenue neutral”, whereby revenues must be used to reduce other taxes, so the government compensates carbon taxpayers by lowering other taxes they have to pay.
Then there’s the European Union, whose emissions trading system involves a risk of “carbon leakage”, which occurs when companies move production to places with fewer carbon constraints, potentially leading to more emissions worldwide.
So the EU initially gives sectors and sub-sectors with a significant risk of “carbon leakage” more allowances to emit CO2 than others to keep them within the emissions trading system.