Energy giants' scale to be key strength in transition from oil and gas: CEOs

Scale is going to remain a key strength for major producers and traders in the energy and commodity sectors as "pure" renewables companies suffer from a lack of diversification, and the energy transition creates new complexity and demand for commodities like copper, industry chiefs told the ADIPEC conference Nov. 9.

Addressing the online event hosted from Abu Dhai, BP CEO Bernard Looney said the world was shifting from reliance on single energy commodities, such as coal or oil in the past, to a more complex market in which companies such as BP are well placed to become a "one-stop shop."

Looney underlined that BP intends to continue investing in oil, despite its energy transition goals, but said the company's strength also lie in having one of the world's largest trading organizations, able to solve the reliability issues associated with some renewables.

BP, which now promotes itself as an "integrated" energy company and expects to reduce its oil and gas output by 1 million b/d of oil equivalent in the coming decade, will be keen to work with the next US administration on developing multiple energy types, Looney said. He highlighted previous wind power investments by BP in the US, and recent agreements to provide renewable power to US corporations Amazon and Microsoft. He said BP had been the US's largest energy investor since 2005, creating 125,000 jobs.

"Many of those pure-play [renewables] companies are diversifying, they're diversifying because this problem of what a customer needs is only getting bigger, not smaller, and the problem is clean, affordable and reliable energy. And a pure-play renewable company can provide clean and affordable, but the reliability is the issue," Looney said.

"And that's where we come in, we have one of the world's largest trading organizations, we have natural gas, we can couple it with wind, we can couple it with solar, we're a one-stop shop," he said.

"Hospitals, data centers, yes they want clean energy, yes they want it to be affordable, but they also need it to be reliable and that means you have to knit solutions together. We can integrate these forms of energy. That complexity -- that is the opportunity for a company like ours," Looney said.

Commodities complex

At the same event, Jeremy Weir, CEO of trading company Trafigura, also emphasized the benefits of scale and predicted consolidation ahead for the commodities sector generally due to the twin pressures of COVID-19 and the energy transition.

"We've seen bankruptcies in the industry and we have seen a flock to quality," Weir said. "We're seeing more and more consolidation... We're going to see that as larger companies with their global footprint can provide the platform to ensure consistent delivery and good service regardless of the market environment," he said.

While oil would continue to be in demand, the increasing pace of the energy transition and particularly electrification of the world's economy would bring new pressures, particularly sourcing metals, Weir said.

"We forecast extreme demand increases in the likes of copper. That's going to put a lot of pressure on prices, and it's going to change the dynamics of the market-place," he said.

"Copper is key to electrification. For normal power generation, wind turbines and solar panels require five times the amount of copper [compared with] traditional power generation, offshore wind turbines up to 15 times, and then you've got to look at the infrastructure required for electrification," he said, going on to describe similar pressures sourcing battery metals such as nickel.

Meanwhile Vicki Hollub, CEO of US oil and gas producer Occidental Petroleum, said her company's upstream diversity, ranging from shale in the US to oil and gas production in North Africa and the Middle East, was a key strength, and its expertise in carbon capture would be another pillar as it moves to providing carbon capture solutions to other industrial companies.

Occidental deploys carbon capture and storage in combination with its onshore US operations as a means of maximizing recovery rates, while it is trialing carbon capture solutions in the Middle East, including plans to extract carbon directly from the air. It says it captures and stores around 20 million mt/year of CO2.

"We'll also be able to help others with their carbon footprint strategies because we'll be able to help those industries that don't have the capability to further build their efficiency to lower their carbon footprint," Hollub said. "This will ultimately go beyond what we're doing for our own operations today."