BP boss widens transatlantic rift in energy industry over climate change

BP has threatened to widen a rift between European and US oil companies over how to respond to global warming by urging political leaders to deliver a “substantial” deal at international climate change talks later this year.

Bob Dudley, chief executive of the British oil and gas group, said the United Nations global warming summit in December needed to broker agreements that encourage energy efficiency, renewable power such as wind and the use of gas. Such moves are considered vital if global governments are to succeed in keeping the Earth’s temperatures from rising more than 2C, the internationally agreed threshold to prevent widespread flooding, famine and desertification.

Asked what he wanted to see from the UN conference in Paris, Dudley said:

Something substantial needs to be done. We are conscious of that ... we encourage policymakers to move forward on this when they meet in December.”

His comments came amid signs of a transatlantic rift in the oil and gas industry over how to tackle global warming. Last week, BP and a group of European oil companies including Shell and Total of France wrote a letter to the Financial Times calling for “widespread and effective” carbon pricing to be part of a Paris deal. But that move was dismissed by John Watson, chief executive of US-based Chevron, who said he had declined to sign the letter and believed that putting a price on carbon emissions was unworkable.

“It’s not a policy that is going to be effective because customers want affordable energy. They want low energy prices, not high energy prices,” Watson told an Opec seminar in Vienna last week.

ExxonMobil, the largest stock-listed US oil group, said it was also at odds with the European strategy saying “we are not going to fake it on climate change” by joining a corporate alliance on the environment.

The Paris conference hopes to achieve a legally binding and universal government-level agreement on combating climate change. It is meant to take over from the Kyoto Protocol which formally ran out in 2012.

Dudley admitted on Wednesday that he had approached American rivals to help to lobby for change. He said some had different views but others were “very, very close” in their assessments about how to react to the problem.

The BP boss, who is a US citizen, said it would be wrong to portray a serious split between the oil companies and effectively blamed the coal industry for the difference in approach.

“The coal lobby is very strong in the US and I think American [oil] companies want to keep a low profile compared to us.”

He was speaking at the launch of the annual BP Statistical Review of World Energy, which showed growth in global C02 emissions during 2014 slowing to 0.5% compared with a recent average increase of 2%.

Part of the decrease was due to the reduction in the amount of coal burned in China and partly because Beijing is using more renewable energy – hydro-powered electricity in particular.

Dudley said he too wanted to see a growth in low-carbon energy and pointed out that BP had invested up to $10bn in low-carbon initiatives in recent years. “We may do more,” he said.

But Dudley said policymakers should do far more to stop people wasting energy and argued that the fossil fuel sector was not necessarily best placed to kickstart a green power revolution.

“I don’t think the world should look on oil and gas companies and say you should go into renewables.”

Renewables were the fastest-growing form of energy, accounting for one third of the increase in overall primary energy use during 2014 but they still only accounted for 3% of the world total, according to the BP review.

Meanwhile, Spencer Dale, the group chief economist at BP, said the oil and gas industry believed that carbon capture and storage (CCS) was a vital technology to help beat climate change although he admitted there were technical challenges.

Dale also questioned whether a major increase in CCS would happen without government backing. “Is there a market failure here that [means] you need some kind of public investment?” he said

The BP review showed that the amount of proven oil and gas reserves found by the industry was twice as much as in 1980. The company dismissed the idea that BP might have “stranded assets” which could not be burned if the 2C limit is to stay intact, saying that the major stock-listed companies owned a tiny percentage of the world’s total reserves.

Dudley said he expected the price of oil to remain low for a couple of years but said costs and taxes were beginning to come down, which would help the industry. He added: “It is better to plan on [a low price scenario] than hope.”