Oil and Gas Sector Told to Step Up Climate Game or Lose Investment

as a result of its inadequate response to climate change.

 

Tim Eggar, the chairman of the sector’s U.K. watchdog, the Oil and Gas Authority (OGA), said the industry had to move quickly to provide tangible solutions — or face the consequences. 

 

Eggar, also a former U.K. energy minister, said Thursday that the industry must demonstrate action immediately.

 

"Listen or read much of the social media and popular press, and [it suggests] our industry is part of the problem, not part of the solution. Industry’s license to operate is under serious threat. [The] industry is not even really in the argument, never mind winning it. It is, in my opinion, collectively not doing enough, and its social license to operate is under serious threat,” he said.

 

“There has been too much navel-gazing. We have to act much, much faster and go further in reducing the carbon footprint. Our energy systems must keep improving at pace, to become cleaner and more efficient, and this requires ambitious thinking, capital investment and bold leadership. Action — not just talk or more analysis,” he said.

 

In an interview published in Time this week, Shell CEO Ben van Beurden admitted his company and others were aware of the climate science but chose not to act, saying: “Yeah, we knew. Everybody knew. And somehow we all ignored it.”

 

The consequences of failing to act now could include losing access to capital in an increasingly discerning financial market.

 

Valentina Kretzschmar, director of corporate research at Wood Mackenzie, said some in the industry are still ignoring the problem.

 

“The U.K. O&G authority’s message on the impact of the energy transition on the oil and gas sector will be a wakeup call for many companies, some of which still believe that they will not be affected by this fast-accelerating mega-trend.

 

"The energy transition will have an impact on every single oil and gas player, no matter how large or small. New strategies will have to be created to align the company goals with the most basic climate-related requirements, such as setting targets to reduce carbon emissions. Failing this could result in the removal of the social license to operate as well as access to capital.”

 

The threat to investment is a very real one. 

 

Earlier this week Larry Fink, CEO of the world’s largest asset manager, BlackRock, said sustainability concerns will reshape the financial sector. 

 

The firm is tightening its own investment choices, including walking away from coal, but its influence will stretch further. BlackRock said it will vote against directors and management that fail to acknowledge, communicate and act on climate risk. Last year the company dissented against the boards of 2,700 companies across a range of issues. 

 

Glasgow will host the U.N.’s COP 26 climate negotiations in November; Eggar said demonstrable action should be underway before then.

 

“Well in advance of COP 26, the industry needs to have developed and gone public on a compelling package of measures which demonstrates real, genuine leadership and commitment to net-zero [carbon]. Now is not the time for anyone to be waiting on anyone else,” he said.

 

As well as cutting operational emissions by electrifying offshore platforms, Eggar said North Sea oil operations could become carbon-negative via carbon capture, utilization and storage (CCUS) processes.

 

“Policy on CCUS is for government. We need policy clarity as soon as possible. In partnership with government, there needs to be a firm and verifiable plan for industry to develop CCUS. Success could help make the basin carbon-negative.”

 

“CCUS has to be made ‘investible’ at utility rates of return. If the necessary rapid progress is to be made, industry needs to be open and transparent with government,” said Eggar, establishing the challenge of having meaningful work complete on two CCUS projects before diplomats gather in Glasgow late this year.

 

The U.K. oil and gas industry adheres to the government’s Maximising Economic Recovery (MER) U.K. Strategy. Eggar called for a review and update of MER U.K. so the country’s 2050 Net Zero target can be embedded into it.

 

Spanish major Repsol jumped ahead of its rivals last year when it became the first to set a 2050 net-zero target. The target includes Scope 3 emissions, those which are created via the use of its products.

 

Eggar also said there would need to be renewed efforts on the sector’s integration into the power sector through hydrogen and other technologies.