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Charles Kennedy

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Big Oil Clashes Over Fossil Fuel Future

Executives from major oil companies clashed over the prospects of oil and gas for the future at the first virtual edition of the CERAWeek conference in Houston.

While BP’s Bernard Looney and Shell’s Ben van Beurden boasted about their shift away from their core business and into renewable energy, Baker Hughes, Hess Corp., and Spain’s Repsol were among those believing that fossil fuels have yet to leave the scene for good, the Houston Chronicle’s Paul Takahashi reports.

“We’ve been an oil and gas company for 112 years, and I think this is a moment where we do have to reinvent the company,” BP’s Looney said. “We decided to really embrace that energy transition, more as a massive opportunity and not look at it as some sort of threat to our core business.”

“Hydrocarbons are still going to be essential for providing energy to the world, especially in the near term,” Baker Hughes’ Lorenzo Simonelli said, echoing an earlier statement that “There is no scenario where hydrocarbons disappear,” as expressed in his opening speech at the Baker Hughes annual meeting held last month.

As per the Houston Chronicle’s report, Hess Corp. and Carlyle International Partners shared their belief that demand for oil and gas will, in fact, rise over the next ten years despite the international push towards cleaner energy sources.

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“We’re in a V-shaped recovery for demand,” Hess chief executive John Hess said, as quoted by Chron. “Once inventories are drawn down and we get rid of the glut, the challenge will be investment, and we’re going to need stronger prices to encourage that investment.”

Indeed, oil price movements seem to support the pro-fossil fuel view. Despite President Joe Biden’s—and the European Union’s—green agenda, the news of mass vaccinations and stimulus programs for the world’s largest economies have served to boost oil prices, suggesting that market players expected a demand rebound.

On the other hand, if governments dedicated to reducing their use of fossil fuels continue with the same enthusiasm, the long-term prospects of oil, at least, are likely to darken before too long.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on March 02 2021 said:
    Hydrocarbons particularly crude oil and natural gas are here to stay. They will continue to drive the global economy throughout the 21st and probably far beyond.

    It follows then that I find myself siding with the arguments of Baker Hughes, Spain’s Repsol and Hess Corp that there is no scenario where hydrocarbons disappear now or ever.

    With rising crude oil prices projected to average $60-$65 a barrel this year, a highly reduced breakeven price from pre-pandemic $54 to $38 now and huge cuts in capital expenditures (Capex), Big Oil should expect a bumper year in 2021 with combined cash flow topping $140 bn this year if not double that figure higher if Brent crude rises to $70 a barrel.

    This goes to prove irrevocably that Big Oil’s core business remains oil and gas. Any drive by Big Oil particularly Shell and BP towards greenwashing itself will lead it nowhere except to a vicious circle of less income, smaller size leading to lesser income and even smaller size until its becomes irrelevant in the scheme of things.

    The greatest service Big Oil can extend to the environment and global emission reduction is to continue to develop technologies to cut emissions in its production of oil and gas while sticking to the core business that has sustained it for decades, namely oil and gas.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Stuart Johnstone on March 03 2021 said:
    I can agree with both side as I see truth in both standpoints. As Mamdouh stated, oil and gas are here to stay for certainly a large number of years, simply because renewable energy will not be able to fulfill a large part of the energy needs of the world. One reason for this is among other things insufficient - or even non-existant - infrastructure. However I disagree with Mamdouh with respect to his stated "greenwashing". It cannot be denied that renewable energies are definitely are growing market and for large energy companies (which I prefer to call Shell, BP Exxon etc instead of just oil companies) to invest in a foreseeable growing future market is just good business practice. Both oil and renewables will be needed and used for many years to com

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