Bill Luyties, OWOE Technical Editor: There is no doubt that the world needs oil and will continue to need it for some time while the transition to renewable energy plays out. There is also little doubt that that burning of fossil fuels and associated carbon dioxide release into the atmosphere have contributed greatly to the current crisis that is global warming (see 97% of active climate scientists agree). Examples of the impact on the world's climate are all around us - from the record-breaking temperatures around the world, to the forest fires in Canada, California, Spain, Greece, and Hawaii, to the melting glaciers in the Arctic and Antarctic and rapidly rising sea levels. So, where does Big Oil fit into this ongoing transition? The last several years have seen Big Oil, which has been the source of much of the public misinformation about climate change, pushing the narrative that they will be part of the solution. How is that going?
In December 2022 the US House of Representatives Committee on Oversight and Accountability issued a report (since deleted) documenting how Big Oil companies are "greenwashing" with claims that they embrace clean energy even though behind closed doors they dismiss the effort and plan to continue fossil fuel investments. And Figure 1 shows a comparison by DW (Deutsche Welle) from 2021 of Big Oil's public messaging containing green claims versus the percentage of capital expenditures within their total yearly budgets. Chevron, ExxonMobil, and Shell are relatively similar in their efforts to greenwash the public.
Let's look more closely at Shell Oil Company, a company that I spent 30 years working for at the start of my career. I can't deny that those were some of the best years of my career working on cutting-edge technology and projects to develop deepwater oil and gas reserves around the world. But the world has changed dramatically in the years since I left Shell as the impact of burning fossil fuels has become better understood, and the early fears of "climate alarmists" have become a sobering reality. For a while I believed that companies like Shell were making progress towards reducing greenhouse gas emissions and funding and developing green energy technology.
In 2021 Shell surprised activists and investors by committing to a number of steps in the short term to reduce its carbon footprint for the production of oil, and in the longer term to embrace green energy. Under the leadership of former CEO, Ben van Beurden, Shell announced its target "to become a net-zero emissions energy business by 2050, in step with society's progress in achieving the goal of the UN Paris Agreement on climate change". This included reducing emissions from operations and from the fuels and other energy products they sell to their customers as well as capturing and storing any remaining emissions or balancing them with offsets. It also included transforming the business by providing low-carbon energy such as charging for electric vehicles, hydrogen and electricity generated by solar and wind power. And then, Van Beurden was replaced at the beginning of 2023 by Wael Sawan, who had been the director of integrated gas, renewables and energy solutions. To much of the outside world, the choice signaled that Shell was not just moving forward but taking a leading role in the energy transition.
My was that wrong!
Within 6 months of taking office, Sawan announced a scaling back of its targets to reduce its carbon footprint, a shift back to focus on oil and gas production, a paring back of investments in renewables, and a reorganization to eliminate any global focus on renewables. This was driven by shareholder pressure to focus on oil and gas as the most profitable businesses. Shareholder income would be sharply increased, capital expenditure would be reduced, and money saved would be used to buy back stock shares.
Even before this abrupt change, Climate Action 100+, an investor-led initiative to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change, rated 171 companies that are key to driving the global net zero emissions transition. Based on publicly disclosed information as of May 2022, Shell was given a mixed review. However, one area in particular, Item 6.1, Capital Alignment - The company is working to decarbonize its capital expenditures - was scored as "No, does not meet any criteria". Essentially, the company talked a good game but was making no effort to align its capital spending to what it was telling the world.
Shell and the rest of the Big Oil fraternity have neither acknowledged their role in climate change nor taken any meaningful steps to play a part in the solution. Their almost single-minded focus is on continuing to produce oil and gas, which they believe will make the most money in the short term. It does not matter how that will impact the planet and its eight billion people and what that cost to society will be. And it shows absolutely no vision regarding how an energy company might survive and even thrive in a fossil-free world. One can't help but wonder about the parallels with the tobacco industry and whether Big Oil's lack of responsibility will become legal liabilities in the future.
Once again, Big Oil stuns with its lack of vision and hypocrisy.