Is this a game changer for the oil and gas industry?
"Looking back over the past three years, I'm struck by just how far we've come with the OGCI, and how quickly we've come," Bob Dudley, BP chief executive and current chair of the Oil and Gas Climate Initiative, told a room full of investors, fossil fuel industry executives, green NGOs and journalists late last week.
He was speaking at an event held in London to announce the first three projects to secure funding from the fossil fuel coalition's $1 billion Climate Investments arm: one carbon capture and storage project; one low emission cement production project; and one high-efficiency vehicle engine technology project.
It was an intriguing spectacle. Dudley and nine other CEOs of some of the world's largest and most profitable companies — including Shell, Saudi Aramco, Statoil, Total and BP — representing trillions of dollars of annual revenue and a fifth of global oil and gas supplies slapping their own backs for how far and quickly they have moved in embracing the low-carbon transition.
What's more, they also published a progress report detailing the OCGI's work since its inception in 2015. Less than 20 pages long, it is mostly made up of photos and pull-quotes.
Indeed, it's taken these 10 giant companies three years to invest a sum likely in the region of tens of millions of dollars — although they wouldn't actually say exactly how much — across three projects aimed at reducing emissions from oil, gas and heavy industry. For all that, it is welcome to see incumbent fossil fuel firms engaging with the low-carbon economy, it would be hard to describe the progress so far as radical, rapid or urgent.
Yet announcing these projects, Pratima Rangarajan, CEO of Climate Investments said the OGCI did "feel an urgency" in tackling climate change, explaining the aim of the group's investment arm was to focus on lowering methane emissions, scaling carbon capture, use and storage (CCUS) technologies, improving energy efficiency and cutting transport emissions.
"Climate Investment's goal is to reduce emissions by investing in technologies and solutions that are both cost-effective and can scale globally," said Rangarajan, who only took up her position in June, having previously worked on renewables at both General Electric (GE) and Vestas. "The impact of these investments will not be felt until they get deployed globally, and that in infrastructure projects takes a long time. So we at Climate Investments, as in OGCI, feel an urgency."
However, the event was also intriguing because sat on a panel alongside these 10 CEOs — and U.K. climate change and industry minister Claire Perry, who stressed the importance of developing CCUS, but said not much more — were several climate change experts and advocates for far more forceful action on decarbonization.
Moderated by BBC economics editor Kamal Ahmed, a discussion ensued that was at times surprisingly lively and open — certainly more so than one might expect from an event organized by a group of fossil fuel companies not especially known for their transparency.
So, when in the wake of the three investment announcements several oil and gas executives talked up the "urgency" of the need to reduce global greenhouse gas emissions, they were challenged about their efforts to date, albeit diplomatically.
Rachel Kyte, U.N. special representative for Sustainable Energy for All, described sections of the fossil fuel industry and some policy makers as "mealy-mouthed" for not being nearly forceful enough in their support of low carbon innovation and carbon capture technologies.
"We're at a moment where we've put one foot across the stream, but we haven't transferred all the weight on that front foot," Kyte said. "All of the companies in this room benefit to some extent from a heavily embedded subsidy regime across most governments that still provides all kinds of support for the fossil fuel part of the energy mix."
Moreover, another contributor to the panel discussion was Fred Krupp, president of U.S. green NGO the Environmental Defense Fund (EDF), who issued a strong challenge for companies to do much more to reduce methane emissions from their own operations.
The OGCI did, alongside its three investment projects, announce a partnership with the U.N. and EDF for the world's first global methane study as part of its newly stated aim to "work towards near-zero methane emissions from the gas value chain." And with all 10 CEOs repeatedly trumpeting the importance of replacing coal with gas as part of the gradual decarbonization of the world's energy system, the commitment to tackling methane leaks from inefficient gas projects and pipelines could be seen as major news.
As Krupp argued, reducing methane leaks across the industry is one of the fastest and cheapest opportunities for slowing global warming, and for climate change the "single most important factor now is speed." He pointed to International Energy Agency (IEA) figures showing it is economically feasible to cut oil and gas methane emissions by 75 percent with current technologies, and that as much as two-thirds of these emissions savings can be achieved at no net cost. Such emissions savings, he said, could have the same 20-year impact on global temperatures as closing all the coal-fired power plants in China.
"So we can debate about what the government policies should be on bringing forward CCUS, but all we need is action by these companies to reduce emissions and we get tremendous near-term benefit," Krupp said. "So for an industry that makes its business case on being part of the bridge to the future, there's an opportunity here to be much, much cleaner and 75 percent of these emissions can be reduced now."
He called on the OGCI companies to therefore set ambitious, transparent targets to address methane leakages from oil and gas.
"If you ask: 'Is today's announcement enough?' Then I would say: 'No, not by a long shot'," he added. "There is a lot more that can and should be done."
Dudley, perhaps unsurprisingly, defended his industry against some of these criticisms. He pointed out that to start with, getting 10 huge companies that are also competitors onto the same page is no easy nor quick task, but that in any case the OGCI only represented collective low-carbon investments. Each member company, he said, is also individually doing a "wide, wide range of investment in the low carbon transition and renewables."
In fairness, collectively the OGCI companies have over the past five years invested $19 billion in renewables and $3 billion in clean tech R&D, while on average 21 percent of these companies' R&D budgets have been focused on low-carbon technologies.
"So it's not just about OGCI," Dudley said. "We need to leverage OGCI, and I think we're off to a good start. There's a cold pipeline of things that we'll do going further. And these are technologies we plan to share with the world."
However, Dudley was less conciliatory about one particular criticism leveled by Kyte. "I don't understand the comment that our industry works off subsidies," he said. "The fuel excise taxes in Europe alone, governments collect $250 billion a year, so there may be some subsidies but there's an enormous amount of tax that comes from the industry."
He also batted away suggestions the OGCI's latest announcements and investments are far too small given the scale of the challenges and the financial strength of the firms involved: "I don't think we can ever do enough in this area... You can't solve this issue with just renewables… We need a mix of renewables, oil and gas."
Still, the third intriguing aspect of the event may be that the headline low carbon project investments might prove one of the less-important functions of the OGCI. Part of the Climate Investments arm's role is to leverage support for low carbon innovation from other investors, thereby potentially significantly enhancing the widely criticised $1 billion over 10 years committed by the OGCI.
So far, Climate Investments has announced plans to co-invest with Energy Impact Partners — a fund backed by a collection of major utilities such as National Grid, TransCanada and OGE Energy — and Breakthrough Energy Ventures, launched last year by billionaires such as Bill Gates, Richard Branson and Amazon founder Jeff Bezos.
So while many deem the OCGI's progress on low carbon investments and on developing CCUS in particular as too slow, the coalition is at least working behind the scenes to drum up backing beyond its 10 members, which will be crucial in making carbon capture a commercial reality on a wider basis. This also could add some substance to the CEOs' repeated statements on the need to rid the world of coal-fired power, and also help make CCUS a going concern, despite the limited funding earmarked towards these purposes over the next decade by OGCI itself.
Furthermore, that the OGCI is working with outside organizations to address the industry's methane problems, while also internally operating as a forum for its 10 members to discuss and collaborate on decarbonization, enhances the overall dialogue the sector desperately needs to be having. After all, even if its membership includes no U.S. companies, the OGCI is a hugely influential group of global corporates.
It does, though, remain to be seen how well it will use that influence, as ECIU director Richard Black pointed out on Twitter:
A few small but welcome announcements aside, OGCI's insistence that it has delivered genuinely rapid progress over the past three years feels like a bit of stretch. But it remains too early to write off an initiative which could provide a useful source of low carbon capital and a major boost to decarbonization efforts, if only the industry can move past some of its tired talking points and truly embrace clean tech innovation.