Will COP21 Spur Big Oil to Invest in Low-Carbon Technology?
The Paris climate deal — and the actions it will require to keep global temperature rise to “well below” 2 degrees Celsius — can go one of two ways for big oil. Either it’s a nail in the coffin of the high-carbon-emitting industry, or it’s an opportunity for oil companies to develop a low-carbon future.
At IHS CERAWeek, the world’s largest gathering of oil executives held last week, industry insiders told Reuters it’s the latter — an opportunity to improve and cheapen carbon capture and other technologies that will help oil and gas cut emissions and protect the industry from climate change legislation.
“If you could eliminate all of the carbon dioxide from fossil fuel combustion, then you could use those fuels as long as you want,” said Robert Armstrong, director of the MIT Energy Initiative, in an interview with Reuters, adding that renewables should also be part of the oil industry’s research focus. “It’s just a matter of making those technologies competitive in the market.”
A number of international oil companies have for many years pursued research and development of low-carbon technologies and business opportunities, Navigant Research energy director Nick Allen tells Environmental Leader. “The question is whether they are doing enough, fast enough? COP21 potentially provides the necessary momentum.”
Capital Investment Vs. Core Hydrocarbon Business
At the COP21 Paris climate talks in December, all 195 nations pledged to keep a global temperature rise this century to well below 2 degrees Celsius. After they ratify the deal, governments will likely begin mandating emissions reductions. The industry doesn’t want that to mean that oil and gas production will be banned in some areas.
Allen says oil companies have, and continue to, pump significant research and development money into renewables, carbon capture and storage technologies, biofuels, and even electric and fuel cell mobility. “The fair challenge that has been placed at the door of these companies is the relative scale of this capital investment versus that made in their core hydrocarbon business,” he says.
For example, carbon capture and storage — a suite of different technologies — has huge potential. It can drastically reduce emissions from the fossil-fuel based energy sector and it’s expected to play a key role in the US’ plan to cut carbon emissions. But it requires huge amounts of energy and, like any new technology, is expensive, making it cost-prohibitive for widespread use.
Shell and BP are among the big oil companies with biofuels ventures to cut back on biofuel research spending in recent years because they say the technology will not be economically viable until 2020 or later. CEOs of both companies have also urged governments to put a price on carbon, which they say would make some types of renewable energy competitive with gas-fired power and would make carbon capture technology economical.
Despite investing in clean technologies, big oil has not seen the progress it had hoped for and “their current reliance on hydrocarbons remains clear,” Allen says. “They know that analysis shows that it can take 20 to 30 years to go from technology conception to even a very small share of the world’s energy mix, so there is an understanding of the criticality of time. The fundamental challenge is to prove the validity of the technology itself and then to be able to produce at scale at a price that the market will accept.”
Will New Technologies Save Big Oil?
But they are investing. Allen points to Total of France, which is investing heavily in solar energy through SunPower. And Shell’s Quest carbon capture and storage project, designed to capture and store more than 1 million metric tons of CO2 each year, begun operations in Alberta, Canada, late last year.
Lux Research analyst Colleen Kennedy says Novareach Technologies, Compact Membrane Systems and Aspen Products Group are three companies developing innovative membranes for carbon capture systems, which could make the technology more economical.
Kennedy says that to stay competitive, oil companies should focus on technologies ranging from leak detection to emissions reductions. “This includes everything from drones to monitor and inspect pipelines to using data analytics to better understand pain points,” she says. “Some technologies aiming to reduce emissions have faltered under low oil prices, such as small-scale gas-to-liquids technologies to reduce flaring, for example. Others, such as Rebellion Photonics, which provides leak monitoring with hyperspectral cameras, have been gaining significant traction in the industry.”
One clear signal to the oil industry from COP21 is that stronger emissions regulations are coming.
“Why is this important? Because regulation can provide strong price signals, and strong price signals promotes investment,” Allen says. “I believe the desire from a number of oil and gas companies is there, the question is whether governments, the oil and gas companies and other stakeholders can work a common path — technology, regulation and wider society support. If this happens and the technologies become proven at scale, then I believe you will start to see the kind of capital investment from the oil and gas companies that that will be required to scale the solutions.”
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