Many of the world’s major oil and gas companies are still grappling with how to respond to the international climate change agreement that 195 nations struck in Paris last month, interviews with several industry officials revealed.
Asked to discuss the U.N. deal to slash global greenhouse gas emissions — which could threaten the very existence of the traditional energy industry — top multinational oil corporations shared few details. Most were vague and some were nonresponsive to questions about how and whether the agreement will affect their long-term business plans.
"Paris is really a framework for additional policies to reduce emissions," Exxon Mobil Corp. spokesman Alan Jeffers said. Asked if the Paris deal changes the company’s business, which has been using an internal carbon price in long-term calculations, Jeffers replied, "I don’t think so."
The Paris agreement urges all nations to peak emissions "as soon as possible" and then rapidly reduce them to hold global temperatures "well below 2°C above pre-industrial levels." At the summit, major oil companies were far quieter than other industries affected by the deal. Now, experts said, they’re left to digest its meaning amid low oil prices, a populist divestment campaign against their products and renewable energy technologies that have become significantly cheaper.
"The companies obviously have a lot to worry about right now, and this is just one part," said Richard Kauzlarich, who served as U.S. ambassador to Bosnia and Herzegovina, as well as Azerbaijan, during the Clinton administration.
"My guess — and I’m guessing — is that climate change is pretty low down on their list," said Kauzlarich, now the co-director of George Mason University’s Center for Energy Science and Policy. The American oil majors, he hypothesized, "are heaving a sigh of relief" that the deal wasn’t more stringent.
"People get locked into seeing the future a certain way," he said.
Sticking to the script
Spokespeople for BP, ConocoPhillips, Chevron Corp. and Phillips 66, in responses to questions from ClimateWire, did not explain how the Paris deal could change their corporate plans or their companies’ strategies. Officials with Statoil could not be reached. Meanwhile, a Chevron Corp. spokeswoman, asked twice if the Paris agreement in any way changed the company’s strategy, stuck to a verbatim statement.
Fossil fuel use, the official said, is "a contributor to rising greenhouse gases," climate solutions must be cost-effective, and governments should not subsidize some energy sources over others.
For Royal Dutch Shell PLC, Paris was a signal to continue on its current path. Curtis Smith, spokesman, said the deal "reinforces our approach."
He noted that the global agreement underscores the need for carbon capture and storage technology, an expensive emissions-trapping method Shell has long prioritized, as well as the importance of natural gas. Shell has money in a hydrogen-electric vehicle network in Germany and supports a "strong and stable government-led" carbon tax, he added.
"We also recognize renewable energy options are growing and becoming more competitive in supplying electricity, interplaying well with flexible, lower carbon natural gas power," Smith said in an email.
Total SA, a French multinational, was vocal in Paris, touting its majority stake in SunPower Corp., a California solar firm, and that about half of its operations are based on natural gas (EnergyWire, Dec. 4, 2015). But officials did not respond to requests to discuss the impact of the deal.
A Phillips 66 spokeswoman said the company is "evaluating the Paris accord and the potential impacts on our business."
Divide on climate across the oceans
BP spokesman Jason Ryan said the company is pleased that the Paris deal could lead to a carbon-pricing market.
"BP welcomes the direction provided by the Paris agreement," Ryan said in an email. Bob Dudley, the CEO of BP, said in November that the company’s portfolio was approaching 60 percent gas and 40 percent oil.
A spokesman for ConocoPhillips did not respond to queries about Paris but instead said carbon policies should create a level playing field of energy sources.
And Jack Gerard, president and CEO of the American Petroleum Institute — the nonprofit lobbying arm of the U.S. oil and gas industry that took in $225 million in revenue in 2013, the most recent year its tax filings are public — said Wednesday that API member companies are taking a variety of approaches to prepare for regulations from Paris and U.S. EPA’s Clean Power Plan to reduce greenhouse gas emissions from power plants.
He called climate change a "serious challenge" but maintained that U.S. emissions are at a 20-year low.
Not all oil firms stayed quiet in Paris. In addition to Total, Statoil ASA, the Norwegian supplier that advocates for carbon pricing and has also pivoted toward gas, was one of six firms whose CEOs called upon governments to price greenhouse gas emissions. BG Group PLC, BP, Eni SpA and Shell were the other four.
Within the industry, non-U.S. companies are generally more vocal about addressing climate change. In October, 10 global oil and gas majors established the Oil and Gas Climate Initiative (OGCI), an industry coalition, none of which were American. Before Paris, the group pressed for the adoption of "clear stable policy frameworks consistent with a 2°C future," and its members promised to report on their climate change progress.
Anthony Hobley, CEO of the Carbon Tracker Initiative, a think tank that examines energy and financial markets, said the difference between U.S. and non-U.S. oil and gas majors on climate is stark.
"Even companies such as Saudi Aramco and Sinopec seem more comfortable in this more progressive grouping," Hobley said by email, alluding to the Chinese state oil company. Aramco is a member of the OGCI group.
‘No surprises’ from Paris?
Combined with the falling costs of competing technologies, the Paris agreement signaled to financial markets and the fossil fuel industry that the age of carbon-based energy is ending, he said.
"The Paris agreement is the lubricant needed to speed this inevitable technological transition," Hobley said. "The next five years is when significant investment could be locked into new high-cost, high-carbon, high-risk assets and infrastructure."
Jeffers of Exxon said the company sees oil and gas playing "significant roles in the energy mix" in meeting growing demand until at least 2040.
"We don’t see any stranded assets," he said. "We think all our assets will be required."
Alan Krupnick, senior fellow and co-director for the Center for Energy and Climate Economics at Resources for the Future, said major oil companies, "whether they’re quiet or not," have incorporated climate regulations into their plans.
The oil and gas industry is aware of and has factored in the costs of the Obama administration’s most salient regulations, he said, citing federal measures to curb methane leakage, the ratcheting up of corporate average fuel economy standards and the heavy-duty trucking measure unveiled this year (ClimateWire, June 17, 2015).
"So companies aren’t burying their heads in the sand," Krupnick said of Paris policies and domestic regulations. "I would imagine the companies are thinking, ‘There’s no surprises here.’"
