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Bob Dudley - how the industry should decarbonise

Friday, July 23, 2021

Bob Dudley, Former CEO of BP and current chair of the Oil and Gas Climate Initiative, shared his thoughts on how the industry should approach decarbonisation, speaking at the Baker Hughes Annual Meeting in February.

The Oil and Gas Climate Initiative (OGCI) is a group of 13 oil and gas companies, aiming to collaborate to support the Paris agreement and transition to low carbon.

Members include the big European international oil companies, national oil companies Saudi Aramco, Petrobras and CNPC, and US companies Occidental, Chevron and Exxon. Together they account for 30 per cent of the world's oil and gas production.

Bob Dudley, chair of OGCI, and a former CEO of BP, shared his thoughts on how the industry should approach decarbonisation, speaking at the Baker Hughes Annual Meeting in February.

'2020 was a very difficult year,' Mr Dudley said. 'I was concerned .. [OGCI} might lose focus. But in fact the companies stepped up and upped their [carbon] commitments.'

The member companies have different investors, governments and customers, and so they are under different pressures. 'They have to pick what we focus on. A group like this can't do everything,' he said.

OGCI has set a collective target for reduction of methane and energy intensity across the membership. 'We've passed the [first] targets, we're about to set more aggressive targets,' he said.

New business models

This is not the first time the oil and gas industry has been told it needs to change its business model. But it may be the first time that it really does need to change, he said.

'In my 40+ years in energy, every time there's a crisis, someone says, 'it's different this time,' but the world bounces back. This time it really is different.'

'It is the art of management of these big companies, how fast they can move, what new business models they can move to. Sometimes [they have to move to] investment models which may have lower returns, but they have to do this to survive and thrive.'

'The climate challenge we have goes way beyond any one company, or any industry, or any country,' he said. 'Governments have set targets for net zero for 2050.

'It looks like US is going in that direction. It is good to see the US re-engage on the climate stage. The change in administration in the US puts a lot more emphasis and urgency on it. That sends a big signal to the world, it re-ignites the goals.

Even China has set a net zero goal. All these things help build the momentum as well as investor concerns.'

But also, 'between 2040 and 2050 we're going to have 2bn more people on the planet. 95 per cent of that energy growth will come in Asia and Africa, which has particular challenges.'

'We're going to need investors to have a little patience with the oil and gas industry,' he said. 'There's clearly a role for the oil and gas industry [in future].'

'IOCs [International Oil Companies] can move a little bit faster. Getting that balance right is critically important. Many industries will have to do the same thing to reduce and clean up.'

Further out we might see investment put into things like hydrogen 'which people call the wonder fuel.'

Although natural gas itself, 'which is a carbon atom and 4 hydrogen atoms, can become a great energy carrier,' he said.

'I've seen no scenario that's credible to hit the aims of Paris without things like CCUS [Carbon Capture, Utilisation and Storage] and natural gas as part of that great transition,' he said.

In terms of the negative perception of the industry held by much of the public, Mr Dudley said it is something the industry has learned to live with. 'The industry has had a negative view [from others] in the US going back to the breakup of the Standard Oil Trust.'

'I don't think you get there by companies or industries saying 'trust us', you actually have to act.'

'Maybe we don't tell our story very well, but I know how many people are committed, working inside the industry and these companies,' he said. 'I think we need to keep working, invest, and tell our story a bit better.'

The industry is working together in other ways, such as on methane alliances, and companies are doing many of their own projects.

On the question of whether we need a carbon price, he replied, 'I don't know how we get there without putting a price on carbon and having markets work. It is one of the things that seems to be missing. It can be an actual price, [or] a tax. 200 years of economic history tell us that without a price on something, it is very hard to change people's behaviours.'

'We see it in Europe, there's a carbon market. China is setting up six different carbon markets.

'I am an optimist that it will happen. But this is year for some of these things to come more in focus.'

Mr Dudley was asked about what he has learned about leadership in a time of crisis. He replied, 'People want to see you're on it, but that you're calm and there's a plan. You may need options. I think you have to develop a great group of people around you.'

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