Energy Intelligence Forum, October 2023, London

1. 10/21/23, 2:34 PM Divisions in Energy Grow As Pressures Build | Energy Intelligence
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Divisions in Energy Grow As Pressures Build
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Thu, Oct 19, 2023
Author
Noah Brenner, London
Editor
Paul Merolli

2. 10/21/23, 2:34 PM Divisions in Energy Grow As Pressures Build | Energy Intelligence
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Energy Intelligence
International and national oil companies (NOCs) are rallying around a more “balanced” approach toward fossil fuels and low-carbon
energy, encouraged by post-Ukraine supply pressures and rising near-term oil and gas demand. NOCs and many majors speaking at
the Energy Intelligence Forum in London this week emphasized low-cost oil and gas in both rhetoric and strategic plans, and — in a

3. 10/21/23, 2:34 PM Divisions in Energy Grow As Pressures Build | Energy Intelligence
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shift from recent years — spoke more of extending the runway of fossil fuels with carbon capture strategies than of reinventing
themselves with new business models. But others — utilities, new players and private companies — pushed more nimble and
ambitious approaches to the transition, with some, such as Spanish Cepsa, suggesting rapid change could unfold faster than
expected. Wide differences on future demand projections for both oil and gas create ample space to support almost any strategy. "We
don’t think or believe that renewables [are] yet ready to shoulder the heavy burden of the global [energy] demand,” Aramco CEO Amin
Nasser told the Forum. TotalEnergies, by contrast, has made electricity a “pillar” of its corporate strategy. Competitors, including BP and
Shell, have migrated their transition focus away from power sales toward areas like hydrogen. Within companies, employees can be
divided over strategic shifts, admitted Shell CEO Wael Sawan at a conference session scheduled between two Shell town halls where he
addressed employee criticism of plans to scrap a variety of transition targets. Engie CEO Catherine MacGregor said her company is
replacing gas that used to be sourced from Russia with biogas in the years ahead with a goal to shift completely away from gas by 2045
“because that's what we believe we should be doing." Other speakers, from Chinese think tanks to UK renewable power producers, big
US banks and the US' National Renewable Energy Laboratory, also talked up the rapid pace of electrification and other low-carbon
growth.
The financial sector’s approach appears equally disparate. Despite headlines suggesting post-Ukraine pushback, financiers said
momentum behind ESG remains strong, flows into ESG-related funds are growing globally, and the trend is now spreading to Asia.
But there remain large regional differences. Some complain of a financial “valley” with investors either choosing to buy into pure oil
and gas producers or pure renewables players, and not enough interest in companies whose strategies lie in between. Private
investors have more leeway to play the arbitrage created by buying high-carbon assets and improving their emissions profile to make
them more attractive. Equity investors have embraced oil and gas companies on both sides of the Atlantic over the past 18 months.
However, they are requiring higher payouts to hold shares, raising questions about their long-term commitment. A broad survey from
money manager T. Rowe Price found that the number of public funds in Europe, the Middle East and Asia with some form of carbon
reduction target jumped from 90 to 600 in the past year. Blair Thomas, CEO of private equity player EIG, said his company had more
freedom to invest in hydrocarbon assets but still needed to meet the needs of large investors such as pension funds that had net-zero
commitments. The CEOs of Shell and TotalEnergies both noted that their share prices hit all-time records in recent weeks.
Social divisions surrounding oil and gas were on stark display as protesters, including climate activist Greta Thunberg, loudly
proclaimed that the industry’s oil and gas profits have come at the expense of climate progress and called on the UK government to
cancel the recently approved Rosebank oil project in the North Sea. Industry critics point to disparities between sums being spent on
decarbonization and shareholder returns. Delegates, however, cautioned against painting the oil industry’s ambitions as mere
greenwashing of an old business model, saying that there was a growing and genuine effort to not only decarbonize their own
operations but use their ample expertise to scale areas like carbon capture and biofuels in ways that will help other industry’s cut their
emissions as well. Repsol CEO Josu Jon Imaz noted there were differences within Europe as to how to best achieve the goals of the
transition. “For many people an electric vehicle is pretty expensive,” he said. “There are some other ways to decarbonize mobility” such

4. 10/21/23, 2:34 PM Divisions in Energy Grow As Pressures Build | Energy Intelligence
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as biofuels that can work with the existing vehicle fleet. Still, Total CEO Patrick Pouyanne said the industry must be proactive and
demonstrate its commitment to the energy transition to earn its social license. "We need to give [the protesters] an answer,” he said.
Topics: ENERGY INTELLIGENCE FORUM 2023, CO2 Emissions, Equity and Debt Markets, Corporate Strategy , Majors, NOCs, ESG, Biofuels (incl. SAF), Carbon Capture (CCS)