At Global Energy Conference, Oil and Gas Industry Leaders Argue For Fossil Fuels’ Future in the Energy Transition

Energy titans from around the globe were set to discuss climate change and the challenges it poses to their industry when they gathered in Houston this week, but Russia’s invasion of Ukraine, and the turmoil it unleashed in energy markets, reframed their agenda. Taken together, the twin crises pose an existential threat to the industry. 

As Europe’s recently developed plans to speed their shift to green energy make clear, governments and consumers could react to high oil and gas prices and heightened volatility by accelerating a move away from fossil fuels.

But some executives and their supporters in Congress stressed a different point. The war, and its disruptions to Russia’s oil and gas exports, showed the need for greater production of their products, they said, and for a loosening of climate-focused regulations that constrain development. The invasion, they said, shows how crucial their industry remains to the global economy and how American oil and gas exports can serve national interests.

There was another theme, too, independent of Ukraine. Even in the long term, many executives argued, the urgency of addressing climate change need not sideline oil and gas as fuels of the past. Instead, they said, the fuels can serve important roles in a low-carbon future.

S&P Global, the financial analysis firm that hosts the annual CERAWeek conference, kicked it off with a conversation with John Kerry, special presidential envoy for climate, who delivered a sober message to a ballroom packed with hundreds of executives, investors, analysts and more: The energy transition is not happening fast enough.

He praised the audience for its talent and innovation and extended a hand, saying the industry had to be part of the climate solution. But Kerry gave little room for compromise on the scale or pace of change needed.

“We are driven not by politics or ideology,” Kerry said, but “by mathematics and physics.” He said many countries with goals of reaching net-zero emissions by 2050 “don’t have a clue” of how they will reach them. That uncertainty means the focus needs to turn to the next eight years instead, he said, citing estimates by the Intergovernmental Panel on Climate Change that global emissions must fall by nearly half by 2030 for the world to have a shot at limiting warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit).

“That’s the key,” Kerry said.

Visions of a Fossil-Fueled Future

One week earlier, the IPCC released a report laying out the stark reality of the latest science, warning that human-driven warming had already caused “widespread adverse impacts” across the globe—harming people’s physical and mental health, stressing ecosystems, fueling larger wildfires, more violent storms and deadly extreme heat. Some of those changes are irreversible, the report stated, and have pushed human and natural systems “beyond their ability to adapt.” These effects will get worse, the report warned, as the world careens toward 1.5 degrees Celsius of warming, a threshold it said will most likely be reached by 2040.

But these frightening, vivid stakes were largely absent from many of the week’s panel discussions, replaced instead with abstract notions of an energy transition and decarbonization of the global economy. And the war in Ukraine reframed many discussions.

John Ardill, a vice president at ExxonMobil, said that climate concerns had subsumed energy security in recent years, but that the invasion was changing that. He argued that his company’s plans to expand production in Texas’s Permian basin, the country’s most prolific oil field, can help achieve both goals. Exxon has said it will reach net-zero emissions from its drilling operations there by 2030.

Cynthia Hansen, an executive vice president at Enbridge, a leading pipeline developer, said North American oil and gas was poised to fill the void opened by cuts to Russian imports domestically and in Europe, but that new regulations from the Biden administration were constraining her company’s ability to bring hydrocarbons to market. In particular, she rejected a new policy by the Federal Energy Regulatory Commission that will require companies to study the life-cycle climate impacts of their projects.

The industry received backing from some lawmakers who traveled to Houston. On Friday, Sen. Joe Manchin (D-W.V.) shared his message for the White House on how American energy producers can help counter Russia: “Turn us loose and let us go.”

But the longer-term argument—that oil and gas are not merely bridges to a cleaner future, but can be a part of that future, too—was surely on the agenda before Russia’s invasion.

Kerry was followed by Darren Woods, Exxon’s chief executive, who over the last year has been forced by pressure from investors and others to focus on climate concerns. Last year, Exxon launched a low-carbon business devoted to carbon capture and storage, hydrogen and biofuels.

Woods said these new businesses would, by capturing carbon dioxide emissions, allow fossil fuels to play an important role in a low-carbon future, particularly for the industrial sector, shipping and aviation.

“People focus on oil and gas as the challenge with respect to climate change,” Woods said. “Actually it’s the emissions associated with combustion of oil and gas.”

A week earlier, Exxon announced a proposal to construct a hydrogen production plant at its Baytown refinery outside Houston that would use natural gas as a feedstock, while capturing the associated carbon dioxide emissions for storage underground.

It’s part of a proposed carbon capture “hub” that Exxon and more than a dozen other fossil fuel and industrial companies want to build in the region to allow the existing refineries, petrochemical operations and gas and coal-fired power plants to continue operating by reducing their carbon emissions.

Later in the week, Ardill, the Exxon vice president, said the Houston hub could be replicated in India and other developing countries. He said the company was working with India on expanding gas production to allow for a switch from coal for power generation in the near term—when burned, gas emits less carbon dioxide than coal—with plans to use that gas eventually to produce hydrogen.

Tengku Taufik, chief executive of Petronas, the Malaysian state-owned oil company, made the same point as Woods.

“A future which is decarbonized is not a future free of hydrocarbons,” he said. “We just need to deal with the emissions.”

Even Kerry said natural gas would be a “key component of the transition,” but only if its emissions were captured.

“Don’t Tell Me, Show Me.”

Mark Brownstein, senior vice president of energy with the Environmental Defense Fund, said oil companies have yet to back their claims on carbon capture.

“The burden of proof is on the industry to deliver,” he said. “We haven’t seen the kind of investment that would give you confidence that the industry has confidence that that’s really a strategy forward. Don’t tell me, show me.”

Brownstein and others have also questioned the climate benefits of using natural gas to make hydrogen, given the risk of both gases leaking from pipes and equipment. Natural gas is primarily methane, a potent greenhouse gas, while hydrogen can react with other gases and serve as an indirect climate pollutant with stronger short-term impacts than carbon dioxide. 

But Brownstein said he was struck by the degree to which climate change continued to be a theme in conversations at the conference, even as Ukraine rightly received significant attention. 

“I do think that many people understand that the climate crisis is bearing down on all of us, and that the climate science is as real and threatening to our future way of life as Putin’s invasion of Ukraine,” he said. “I suspect that many of these CEOs are looking for leadership on this issue, so that they know that they have the certainty to invest in the kinds of technologies that will allow us to decarbonize our economy.”

On Wednesday, Energy Secretary Jennifer Granhold attempted to deliver exactly that message, imploring the industry to work with the government and her department, which was given more than $60 billion by last year’s infrastructure bill to fund low-carbon technologies, including carbon capture and clean hydrogen.

An entire wing of the conference, called the “Agora,” was devoted to this realm of the future. There was a “hydrogen hub” and “carbon management hub,” where executives and academics discussed the latest technologies and efforts to reduce methane emissions. In between sessions, delegates drank espressos from the “hydrogen cafe.”

But another development delivered perhaps the most damning news about these efforts to transition the energy industry. On Wednesday, the International Energy Agency released new data showing that global carbon dioxide emissions reached their highest level ever in 2021, fully rebounding from the pandemic and dashing any hopes that countries might take advantage of recovery to build greener economies.

It underscored Kerry’s comments that the transition, despite much talk, was not happening fast enough, or even much at all.