For years, the oil and gas industry has boasted about the longevity and durability of oil and gas reserves despite growing signs that peak oil demand is around the corner. Many companies shrugged off the threat. Suddenly, however, there appears to be a scramble underway by energy companies to begin preparing for the peak and to transition to cleaner forms of energy.
The tone at the IHS CERAWeek Conference in Houston was glaringly different than in years past, with one oil executive after another talking up the need to address climate change and prepare for a low-carbon world. To some degree, this is lip service. Very few, if any, companies are making proactive decisions to leave their reserves in the ground and unburned.
But we seem to be in the midst of a major change in the industry, and one that is not just about a shift in rhetoric. Norway’s $1 trillion sovereign wealth fund recently recommended divesting from upstream oil and gas companies, a move that sent shockwaves through the industry.
Other signs of change abound. Many oil companies are suddenly backing methane regulations. Shareholders are pressuring companies to acknowledge their long-term risks to climate change. Royal Dutch Shell is aiming to reduce carbon emissions by 2 to 3 percent between 2016 and 2021, the first specific target laid out by the company. Importantly, executive pay will be linked to those goals.