BP chief executive Bob Dudley has outlined why continued investment in the oil and gas industry is essential to meeting the dual challenge of providing billions of people with more energy while drastically lowering carbon emissions.
Arguing against divestment in his keynote speech at the Oil & Money Conference today, Dudley said the energy industry is facing a fork in the road.
“We could go the way of people who want to drive a wedge between the energy industry and investors. They push for potentially confusing disclosures, raise the spectre of a systemic risk to the financial system from stranded assets and campaign for divestment − all in an effort to squeeze oil and gas out of the fuel mix.
“They are driven by good intentions, but my concern is that their suggested recommendations could lead to bad outcomes, particularly for some of the most vulnerable people in the world,” he said.
“Or, we could take a different, more innovative and collaborative path; one that recognizes that many fuels must play a part in meeting the dual challenge − albeit, made much cleaner, better and kinder to the planet.”
Outlining flaws in the divestment argument, Dudley told the audience:
It underestimates the continuing contribution needed from oil and gas in the low carbon energy transition. BP sees remarkable growth in the renewable energy sector, as shown by a string of recent investments, with positive estimates suggesting renewables could meet a third of energy demand by 2040. That would still leave other fuels, including oil and gas, making up the remaining two-thirds. Although their share of the fuel mix would fall proportionally from today, there would still be substantial amounts of oil and gas in absolute terms.
It calls for increasingly unhelpful scenario-planning and disclosures that may produce inaccurate results that confuse investors.
It forecasts a systemic risk from ‘stranded assets’, understating the international oil companies’ flexibility to reshape their businesses. Dudley said: “Even though we expect and hope the pace of the transition will pick up, and it certainly needs to, it’s likely that it will be measured in decades rather than years. That leaves time for us to anticipate changing trends and adjust our portfolios accordingly, including many new forms of energy − just as we are doing right now.”
It overlooks how underinvestment in oil and gas exploration could have serious implications for financial instability, as constrained supply could lead to price rises and a slowing of global economic growth.
Dudley made clear that the energy system, including oil and gas, has to change. This path requires: ‘rapid disruption to our industry’. It is already taking significant steps, he said:
“And, we can do this even faster and more efficiently with clearer, smarter policy signals from governments,” he said.
Concluding his speech to the audience of senior industry executives, Dudley said:
“Like many of you here today, I’m an engineer by training. We are, by nature, problem-solvers. I’m confident our industry can continue to help power the world, lift people out of poverty, and keep society advancing – while, at the same time, contribute to dramatically reducing emissions to meet the Paris goals.
“So long as we choose the path of collaboration and innovation over the path of division and exclusion, both our industry and the world have a great future ahead.”