Under-pressure oil majors vow energy transition, albeit at their own pace

Oil majors are under growing pressure to stop drilling for crude to help curb climate change, but companies say they will wean themselves off fossil fuels at their own pace.

The demand for change is coming from many sides: lawsuits, shareholders and the International Energy Agency have all turned up the heat on firms recently.

Last week alone, a Dutch court ordered Shell to slash its greenhouse gas emissions, and investors used shareholder meetings to install activist board members at US oil giant ExxonMobil and demand deeper emissions cuts at rival Chevron.

The IEA sent shockwaves through the industry last month when it declared that no fossil fuel exploration or new oil and natural gas fields are needed, thanks to the "rapid drop" in demand.

The intergovernmental organisation made the suggestion in a report warning that all future fossil fuel projects must be scrapped if the world is to reach net-zero carbon emissions by 2050.

The agency, which advises developed countries, has been criticised by environmentalists in the past for being too timid while calling for oil investments to ensure supply.

BP chief executive Bernard Looney told the Columbia Global Energy Summit that the report was "very much in line" with the British energy company's strategy.

Read | Saudi Arabia committed to meet India's crude oil requirement, says envoy

But Looney also noted that while the report sees much lower investment in fossil fuels, it is "still investment in oil and gas".

"At the end of the day," he said, the report "is a scenario on a piece of paper and what the world needs more than anything is maybe less scenarios and maybe less debate ... and more action."

BP plans to reduce oil and gas production by 40 percent within the next decade, Looney said.

"It's really a question of rhythm," said Nicolas Berghmans, an energy research fellow at the Institute for Sustainable Development and International Relations think tank in Paris.

Companies "are not going as fast as the IEA thinks is needed" and they "are lagging behind" in their transition, he said.

Oil and gas exploration has recently slowed down but this is due to the effects of the coronavirus pandemic.

Huge fields were discovered last year in Russia, Turkey and Suriname.

A report by the consultancy Westwood Global Energy Group found "no evidence of a systematic change in industry exploration strategy" with regards to energy transition.

Also Read | OPEC hikes crude production as economies recover

The group expects dozens of exploration drilling operations this year, including in Mexico, Brazil, Suriname and Guyana.

The chief executive of TotalEnergies, the French energy group which changed its name last week, has bluntly said that the company is not going to give up oil overnight.

"In energy transition there is the word 'transition' and I would like to remind everyone that today we live, our economy functions on 80 percent fossil fuel energies," CEO Patrick Pouyanne said last week, warning against "radicalism".

He said it will take time to switch to other sources of energy for transport or heating while oil demand rises in countries such as China and India.

"It's nice to say that we need to stop producing oil, but if there are no longer enough projects or production, what will happen? Prices will rise," Pouyanne told Europe 1 radio.

Following the IEA's recommendations would cause the prices of oil to surge to $100 per barrel in the next few years, he said. Prices are currently under $70.

BP, Shell and TotalEnergies are betting on gas in their transition, as it is cleaner than oil and coal.

The IEA, however, has also called for a 55 percent reduction in gas consumption by 2050.