Trade tension puts energy transition at risk, BP chair warns
Group prefers a rapid, orderly phasing out of fossil fuels to a delayed and disorganised transition
London — Trade tension could disrupt the global transition to greener energy and energy companies’ preparations for it, BP chair Helge Lund has warned as leaders of the largest economies gather for talks in Japan.
Lund, in his first interview since taking office in January, said BP would rather see a rapid, orderly phasing out of fossil fuels than a delayed and disorganised transition.
The former CEO of Norwegian oil group Equinor said BP and rivals such as Royal Dutch Shell and ExxonMobil will have a vital role to play to ensure a successful transition to low-carbon economies.
“It is better for us to see a path that goes rapidly,” Lund said. “It will be very difficult for the oil and gas companies, but that is a better and a preferred solution than an uncontrolled sudden change maybe 10, 15 years into the future.”
It takes time to change energy systems…. If you try to build down the oil and gas industry quicker than you are able to build up a carbon-neutral system you will pull societies backBP chair Helge Lund
London-based BP, like some of its peers, has taken steps towards meeting the 2015 Paris Climate Agreement to limit global warming, including setting targets to reduce carbon emissions from its operations, link them to managers’ pay and ensure that investments are in line with the accords.
But many investors say BP will have to do more, including tackling emissions from the fuels and products it sells to millions of customers daily, known as Scope 3 emissions, to avert a catastrophic rise in global temperatures.
Lund said that such Scope 3 targets would tie BP’s hands to make future investments, whether in renewable energy or oil and gas. He said the company’s thinking around Scope 3 is likely “to evolve over time”.
BP invested about $500m in renewable power, electric vehicle charging points and other low-carbon technologies in 2018, a fraction of its annual spending of $15bn.
Pressure on companies and governments to do more to curb greenhouse gases is rising as carbon emission levels show no sign of decreasing.
Investors managing more than $34-trillion in assets, nearly half the world's invested capital, this week demanded urgent action from governments on climate change, piling pressure on leaders of the world’s 20 biggest economies meeting this week.
France has said it will not accept a final G20 communique that does not mention the Paris climate change agreement.
“The long-term framework around the energy transition is important. Over time, it is much easier for big companies like BP if we have a stable global framework for trade and investments,” said Lund. .
An unprecedented level of co-operation is needed between companies and governments to bring greenhouse gas emissions to zero by the end of the century, he said.
Lund urged governments to introduce a price on carbon emissions to allow phasing out fossil fuels, even though only a handful of such schemes have been introduced around the world.
Climate activists have blockaded BP's London office and protested at events the company sponsors. Big investors, including Norway’s sovereign wealth fund, are reviewing shareholdings in some oil and gas drillers, though not in BP and its largest rivals.
Lund, who took part in climate talks with a group of investors earlier in 2019, said most investors understand that modern societies are almost built on hydrocarbons.
BP forecasts that even with a rapid rise in wind, solar and other forms of renewable energy, fossil fuels will account for most of energy supply for decades.
Lund also warned that attempts to curb fossil fuels too fast could harm societies.
“It takes time to change energy systems…. If you try to build down the oil and gas industry quicker than you are able to build up a carbon-neutral system you will pull societies back.”
Lund said big oil groups will be vital for the transition due to their large balance sheets, technical expertise and innovation skills.
“To be a strong contributor in the long term we have to stay financially strong, we have to be a good investment.
“There is another dimension that we need to think about. If you believe that BP and other integrated oil and gas companies understand energy markets, they have significant balance sheets, they have technical capabilities, they have innovation capabilities, they can take risks — so… business and these companies play an incredibly important role in the energy transition.”
Lund has to lead BP through the energy transition and oversee the succession to CEO Bob Dudley, who took the helm in 2010 following the crisis over the Deepwater Horizon rig explosion in the Gulf of Mexico.
Dudley also steered BP through the oil industry’s worst downturn in decades so that the company is now producing strong profits that reached a five-year high in 2018 of $12.7bn.
Lund said BP’s board is preparing candidates to succeed Dudley, who turns 65 in 2020.
Lund, a former consultant and political adviser in the Norwegian parliament rejected suggestions he could replace Dudley to become the next CEO.
“I've been CEO for three companies. I thought about this when I left BG whether I should try to get one more [CEO] job or try to get a different life and I decided on the latter and I think it is rewarding,” he said.