A gas flare: CC3.0, Varodrig
Sometimes the oil industry's PR machine doesn't work as well as it should. At their main event at the Paris climate summit on Friday, 'Low emissions pathways and the role of oil and gas', key representatives revealed a number of things they probably shouldn't have. The panel discussion they hosted, and conversations I had afterwards with speakers from Europe's biggest oil companies, were deeply telling.
Their share value depends on COP21 failing (but they can't say that in public)
A few months ago, in a much oft-referred to joint declaration, the heads of ten oil and gas companies, including BP and Shell, issued a statement about the Paris conference. It included this:“Our shared ambition is for a 2°C future. It is a challenge for the whole of society. We are committed to playing our part. Over the coming years we will collectively strengthen our actions and investments to contribute to reducing the GHG (greenhouse gas) intensity of the global energy mix. Our companies will collaborate in a number of areas, with the aim of going beyond the sum of our individual efforts.”
They hadn't just picked 2°C out of the air. The stated purpose of COP21 is to keep the average warming of the planet to no more than 2°C above pre-industrial levels. When this figure was agreed at Copenhagen in 2009, African delegates famously stormed out, chanting “one point five to survive”. To accept 2°C, they say, means to write off whole countries as sacrifice zones for the consumption of the rich, to allow lands to become barren and millions to starve or be flooded. But to accept more than that would be more dramatic still.
At the COP21 fringe I attended last week, someone asked whether the industry accepts that keeping average temperature rises below 2°C means leaving some of their oil in the ground. Liz Rogers, repesentative of our hosts the oil industry group IPIECA, confirmed that yes, she did think that.
I asked a follow up. The share value of these companies is largely based on how much oil and gas they have in their reserves. If they agreed that this cannot all be burnt, then how will they explain this to their shareholders? Won't their oil fields become, to use the jargon, “stranded assets”? And if they already have too much in their reserves, why are they investing in working out how to extract more?
The representatives each gave what I thought were insufficient answers, including that the oil they are discovering now could be for the more distant future. And my favourite: “we've always had stranded assets” – which is rather like someone who has had a slight overdraft for years suddenly finding themselves millions of pounds in the red and saying with a shrug “well, I've always been in debt”.
After the event, I got chatting to the chair, Shell's climate change adviser David Hone, about my question and the lack of a good enough answer. He said that it was a tough one, and I so I asked him how he would have answered it. Here's what he said:“The presumption of your question is that the 2°C is a given. But I think that to answer the question, you have to... say this is not a given. And of course that immediately disenfranchises a lot of people, because that's the model... they're all discussing that over there... (gestures towards negotiation room)”.
He seemed to be saying to me the exact opposite of what Shell and other oil companies have been claiming, largely unchallenged, across the media.
He then seemed a little worried about having just said this to a journalist, and asked me not to quote him.
I've quoted him anyway, because I think this is important. He seemed to be admitting that Shell and the other
oil companies represented can't explain how they aren't massively
overvalued, unless you work on the assumption the Paris conference
will fail to secure a 2°C deal. He seemed, in other words, to
be saying to me the exact opposite of what Shell and other oil companies have been claiming,
largely unchallenged, across the media.
I asked the Shell press office about the comment, and they said that the comments were "a general chat about the nature of the stranded asset debate, not Shell's response to the issue".
They also sent me a fairly generic quote on the matter from their CEO Ben van Beurden:
“In the lead-up to Paris there is a lot of focus on what else is going to happen, can the world come up with a set of targets that will limit CO2 emissions to be aligned with the 2°C scenario, and understandably that is mobilising a lot of sentiment. Our view on that is that we very much like to see this set of targets being adopted, but more importantly we would like to see adopted a sensible set of policies that will get us there, because just agreeing a target is not going to do the trick. The target needs to be achieved by having sensible policies.
"There are a lot of things that policy makers industry combined (sic) can do, and an important element in my sense is to put a price on carbon, because that will drive rational decision-making amongst industrial users, it will drive efficiency improvement measures, and it will enable, if the right price of carbon is going to be set, also technologies like carbon capture and storage, which ultimately are going to be inevitable if we do indeed want to limit carbon emissions to be in line with the 2°C scenario.”
I put Hone's comments to Kumi Naidoo, Executive Director of Greenpeace International (the full interview will be published later this week). He said: "The leadership of the fossil fuel industry and too many of our political leaders as well are suffering from an acute case of cognitive dissonance where all the facts are there, but they're still in denial. Look at what the science is saying, don't look at what Greenpeace is saying. The science is saying... we need to leave 80% of known fossil fuel reserves in the ground if we have a chance to avert catastrophic climate change.
“So actually right now, Shell and the other fossil fuel companies are sitting on stranded carbon assets. And they are in denial. They are lying to their shareholders, they are lying to themselves, and they are lying to their own children and their own grandchildren.
“And so they have to realise, nature does not negotiate. They cannot change the science. However powerful they are, they might control many of our governments, they cannot change the science”.
Statoil's rep seemed to admit that gas is worse for the climate than coal
This wasn't the only big fossil fuel PR line called into question at the event. Margaret Mistry, Head of Sustainability Communication at Statoil, appeared to admit that gas, once you count methane leaks from extraction and transportation, is currently actually worse for the climate than coal:“Methane emissions and reducing those, I think that the goal there that we're all working towards as an industry is to demonstrate that natural gas can compete with coal when it comes to climate effects."
The context for this is key. The oil industry is desperately trying to argue that gas is key to solving the climate crisis. They've taken out ads across the press to argue as much.
However, their wording is always very careful. They say gas is “the cleanest burning fossil fuel” (my italics). What they don't mention is that there is some evidence that the leaking of gas at the point of extraction and during transportation wipes out any 'clean' advantage: methane is a very potent greenhouse gas. Of course the industry could invest more in stopping leakages. But the suggestion that gas is currently struggling to show itself to be better for the climate than coal blows a huge hole in the oil industry's second main message at COP21.
On the train back to Paris after the event, I ran into the aforementioned Shell's David Hone again. I put Margaret Mistry's quote to him. He hadn't noticed it during the event, made a very uncomfortable face, and said that he would be very surprised, and that he didn't believe this to be true.
Oil companies control the space, but not the narrative
The industry reps at the event talked a lot about the importance of carbon capture and storage, but admitted that it's very expensive, and will require significant investment to improve as a technology – which rather undermines the idea that fossil fuels are a useful 'bridge' to a renewable future: what's the point of a bridge to the future if it's expensive, and it isn't ready yet?
I wrote last week about how the main oil and aviation industry groups are at the centre of one of the two rooms at COP21 where all of the government delegations are based. In case there was any doubt, Shell's man confirmed to me “this is our space".
However, they seemed to feel very strongly that they have lost control of the narrative; that they're losing the PR battle with the climate movement. “It reminds me very much of working with the chemical industry post Bhopal, the erosion of the social licence to operate," said Mark Radka, the Head of Energy, Climate and Technology Branch at the UN Environment Programme. "And what that industry learned, working with broader groups... was that you do have to make a change, that change has to be evident, it has to be communicated, it has to be communicated over, and over and over. You can't do it once. Persistence. Digging yourself out of a little hole takes an awful lot of effort."
Elliot Diringer, executive vice president of the Center for Climate and Energy Solutions, agreed: “Part of it's about narrative. Right now, other people are building the narrative, telling the story. You need to tell your story but it needs to be a credible story, so I think there needs to be a change in action behind the story in order for it to be credible and to win support."
In short, the industry people at the event seemed to be in the middle of something of an identity crisis. I expected to show up and see confident people, who feel in control of the process. Instead, it felt rather like going to see a friend who has recently been dumped by a partner they weren't very nice to, and listening to them whinge for an hour about how sad they are, and how they weren't really that bad.
It is impossible for the oil industry to survive in its current form. Either the companies will stop extracting oil, or the climate will change to the point where their operations, customers and staff will face serious consequenses along with the rest of us. Although this has been a reality for quite some time, they seem only just to be coming to terms with it.
We're digging through the media to see how climate change is reported over the Paris climate talks and beyond. Sign up to hear what we find out.
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