Gareth Foulkes-Jones | August 17, 2020
“It is certainly a contentious topic. And one that is undoubtedly being fiercely debated around hundreds, if not thousands of board rooms. It is the issue of how Oil and Gas companies are having to, or possibly not, move with the times and reposition themselves as viable and sustainable businesses in the face of the rising tide of the “Alternate Energy Zeitgeist”.
Knowing the general human condition, this is more than likely becoming increasingly challenging to resolve with factions forming within many, once united teams of executives. Those who are traditionalists and firmly believe that the “Green Trend” is simply a fad, but like all such things will eventually fade away into obscurity. Then there are those who are looking at the ever depleted financial reserves of their once financially sound organisations and realising that in order to survive one has to adapt.
Perhaps from a social and legal protocol perspective, the severity of these ructions are less pronounced for companies based in countries who do not adhere to the Paris Climate Accord. However, whatever impetus this has removed for such organisations to adapt and change has been more than made up for by the impact of Covid19 on international petroleum prices as of late.
The intention of this article is in no way to take a view on the morality of Oil & Gas as an industry. If anything, for the record, my personal opinion is that these companies have provided the base load energy for decades which our economies were completely dependent upon in order to grow and function. And we should be both grateful and thankful to them for their invaluable contribution as enablers for our global society to become what it has today. So before we continue to vilify, let us give credit where credit is justly, in my opinion, due.
Rather, the purpose of this opening article is to initiate a more robust conversation at a board and executive level about the very stark economic realities many such organisations are currently facing. I have the good fortune of living in a lovely country such as Spain. The hotels are empty, the planes are for the most part not flying, certain parts of the country have or may soon return to some form of lockdown. Second waves of Covid19 are remerging in several prominent industrialised nations. All of whom are heavy fossil fuel consumers.
So what does this mean practically? Well, less consumption of petroleum based products for a start. But also the closing of businesses that may also use such products in one form or another. In Valencia alone, just one hotel chain is planning on closing down three of its hotels by the end of this year in order to try survive the decrease in tourism. Why should this matter to Oil & Gas firms? Well, because it is but one very small example of comparatively insignificant consumers going under. But when you start compounding these closures over the thousands, and probably hundreds of thousands of businesses globally. One quickly understands how the numbers start to brutally add up.
Furthermore, many of Europe’s leading airlines are surviving as we speak on generous multi-billion Euro bailouts. These have been granted for the time being out of a combination of national prestige for many governments, as well as political considerations which vary widely based on a range of variables relevant in the respective nations.
However, certainly in Europe, how much longer can heavy carbon emitting industries continue to expect government bailouts and support in light of the much acclaimed “Green Deal”, which was only ratified in Brussels several weeks ago? Under this Trillion Euro deal, various EU countries have been allocated, in differing portions, an additional Euro 750 billion. A substantial portion of which was provided under strict conditions that it be largely used towards the building of a green and sustainable economy. With the ultimate aim of the EU becoming carbon neutral by 2050. Therefore, EU policy has made it abundantly clear that they are not focused on saving the old, but rather on using this crisis as an opportunity to reinvent their energy markets and internal economy as a whole.
In conclusion of this particular piece, I wish to reiterate that whilst I am clearly pro renewable energies, and always have been. I am in no way against traditional energy. For generations they have cooled and heated our homes. Helped cooked our foods, enabled us to drive our vehicles to and from work. And essentially touched every conceivable aspect of our lives. And for this they should be acknowledged with the respect they truly do deserve. But times are changing, and does one wish to move with the times and reinvent oneself? Or stick to the old tried and tested ways, and see where that takes you?