The global push for a green economic recovery could open the door wider for oil and gas companies to tap into clean energy markets, industry observers said at an event hosted by a Washington think tank.
Even as the investment community increasingly shies away from carbon-intensive investments in their portfolios, there is plenty of potential private capital available for traditional oil and gas producers to pursue, according to Robert Johnston, managing director of the Eurasia Group's energy, climate and resources practice.
Big banks, asset managers, insurance companies, Silicon Valley and Wall Street are seeking projects to "deploy their capital to support an energy transition," Johnston said on a July 22 webinar presented by the Atlantic Council. As a result, there is more private capital available than projects to invest in currently, he said.
The challenge is for legacy oil and gas companies to tap into these funding pools, which far exceed capital pools for traditional oil and gas projects, Johnston said.
"I think it's good that some companies at least are thinking about the total transformation at the enterprise level, not just kind of a project here, a project there," Johnston said.
Oil and gas majors will be key in this decarbonization effort, given their expertise and resources that can aid in the development of complex, clean energy projects such as offshore wind facilities, according to Gavin Dillingham, program director for clean energy policy at the Houston Advanced Research Center.
Cindy Yeilding, senior vice president of BP America Inc., said the historically oil and gas-focused company has sought to enter other potential businesses that may help provide stability as the company manages the economic fallout from the coronavirus pandemic.
"We know how to respond in down cycles, and we're pulling the levers that we traditionally use, as well as looking to the future at what are the new businesses, what will be potentially more stable businesses," Yeilding said. "There is a sort of science in thinking that renewables might actually help us get a little bit out of the ups and downs that the oil and gas industry has faced for a while."
BP is also determining how oil and gas employees can transfer their skills to other energy projects. Yeilding said there are plenty of roles for scientists, engineers and project developers to fill in the planning and execution stages of new endeavors.
Alex Dewar, senior director of the Boston Consulting Group's Center for Energy Impact, said U.S. oil majors and independents are facing increasing pressure to reduce their emissions. Failure to do so could threaten investment. In the short run, these companies could focus on plugging orphaned wells and reducing methane emissions, offering a "quick win" in addressing greenhouse gases, he said. Companies could also invest in energy efficiency and carbon capture projects.
"The investor pressure is increasing on this, and investors are looking for what the long-term viability of the business model is for these companies, not just necessarily how can they have a dent in emissions in the short run," Dewar said.
But Dewar also warned that the COVID-19 crisis could hurt the clean energy transition, given the need for economic stability to support such capital-intensive deployments. "I think what we have found in the U.S. in particular is that there is a real risk that the health, social and economic impacts coming out of COVID-19 can really destroy — or undermine at least — governments' and private sectors' economic capacity to promote energy transitions," he said.