March 26, 2021
Major oil companies are falling all over themselves telling the public how they are re-tooling to downgrade fossil fuels and convert themselves into green giants.
It’s one thing for Shell and Exxon and BP to change their business model. But national oil companies, like the National Iranian Oil Co. (NIOC) and Saudi Arabia’s Aramco, can’t shift to wind or solar. They exist to exploit the resource they are sitting on and they may find themselves sitting on a lot more than they had anticipated as there are fewer demands for oil.
The leader in the international firms shifting away from oil is undoubtedly the company founded in 1908 as the Anglo-Persian Oil Co., which then became the Anglo-Iranian Oil Co., and later, after its Iranian assets were nationalized, became British Petroleum, and now is BP.
Bernard Looney, chief executive of BP, said the world is running out of time to cut carbon emissions, but that his company has recognized “an enormous business opportunity” in upgrading the global energy system, which will require trillions of dollars of investment.
Looney said BP would pivot over the next decade by lifting spending on low-carbon technologies and renewable power generation and cutting fossil fuel production 40 percent by 2030. Those efforts, he said, will cut BP’s greenhouse gas emissions between 30 percent and 40 percent.
“We’ve been an oil-and-gas company for 112 years and I think this is a moment where we have to reinvent the company,” Looney said.
BP’s shares have risen about 10 percent since Looney first announced the plans last summer.
Anglo-Dutch Shell, Italy’s ENI and France’s Total have also talked about a big shift. But American oil companies have been slower to climb on the bandwagon.
Chevron CEO Michael Wirth said that 20 years from now, “Oil and gas will still be a very big part [of Chevron’s operations]. Will it be the biggest part? Time will tell.” He said Chevron would stay focused on areas where the firm has a unique advantage. “We’re not sure wind and solar are the technologies that offer that,” he said.
And Exxon Mobil is actually expanding its footprint in the oil business with a big investment to start pumping oil in Guyana. It is the biggest company that seems to be resisting the shift. A study by four scholars says he firms resisting change tend to be those with the largest investments in refining, which has the effect of locking them into fossil fuels for years to come.
Even ExxonMobil, however, is reducing its capital investments around the world to pump more oil.
Chevron says its focus will be on carbon capture and storage, hydrogen and renewable natural gas, which is a fuel produced naturally from bio sources like dairy farms, landfills and wastewater treatment facilities.
And more and more oil industry executives are quoting the ominous words of Shaikh Zaki Yamani, who died in February and who served decades as Saudi Arabia’s oil minister. Decades ago, he said, “The stone age didn’t end because the world ran out of stones. And the oil age won’t end because the world runs out of oil.”
Oil will still be around for centuries and Iran will still be selling oil long after the oil age has ended. But oil will be used then for things other than to power cars and heat homes. And, in fact, Iran began positioning itself for the post-oil age decades ago, beginning when the Shah started up Iran’s petrochemical industries, which the Islamic Republic has accelerated.
The world is focused on the shift away from oil and gas to fuels that do not pollute the atmosphere. But Iran needs to be focused on what its oil can be used for that will keep crude selling at a handsome price.