The boss of one of the world’s largest oil and gas producers has called for an industry crackdown on fugitive emissions, saying it doesn’t make sense for companies to let their products escape.
the main points:
- Leaking gas wells is a “huge” environmental and economic issue, says Bernard Looney, chief executive of BP.
- Methane emissions account for about a quarter of the annual global output of greenhouse gases
- BP boss says slowing global economic activity is likely to weigh on higher energy prices in the coming months
Bernard Looney, BP’s head of oil and gas, said methane leaks from gas wells in Australia and around the world was a “major problem” that needed to be fixed on both economic and environmental grounds.
In a wide-ranging interview with ABC, Looney also said that investment in new oil and gas projects will be needed through 2050, even as global economies move toward carbon neutrality.
The 52-year-old said tackling what he described as the energy triad of emissions intensity, security and affordability was a complex task.
But he said the unprecedented energy crisis that erupted in 2022 showed just how high the stakes are and why governments and investors must be careful about how they manage the shift to renewables.
“What you will see over time, is less demand for hydrocarbons, less investment in hydrocarbons,” Looney said.
But this is not the same as no investment.
“Oil and gas fields are declining faster than societal demand will decline.
And in that medium, you have to invest.
“You have to invest – otherwise, you end up with the problem we have today, which is you don’t have enough supply, prices are going through the roof and the consumer is affected and obviously starts to ask, ‘What are we trying to do here?'”
The less you leak, the more you sell
When he rose to the top job at the world’s sixth-largest oil and gas company in 2020, Looney outlined ambitious plans to reduce carbon production at the company.
One key solution was to address the leakage of methane from BP’s production wells, a greenhouse gas far more powerful than carbon.
Looney noted that methane is a natural gas, and therefore it makes no environmental or economic sense to waste it.
“The less you leak, the more you sell, and there is an economic benefit to that in and of itself,” said the Irishman.
“It is an absolute priority for our company.
“In many parts of the world, increased regulation on methane means that there will be a cost in the regulatory system of methane leakage.”
Clean Energy Finance Director Tim Buckley, a leading advocate for renewable energy, said BP’s efforts to reduce methane emissions sound real.
Mr Buckley said the importance of preventing methane emissions should not be underestimated.
“The reason methane is so important is because it literally accounts for a quarter of the world’s greenhouse gas emissions each year,” Buckley said.
“The scientific agreement is evaluated on the basis of a 100-year offer, but we have a climate emergency which means we have to really talk about methane in a 20-30 year agreement.
“Methane on this basis is 84 to 86 times worse than carbon dioxide.
“It’s the elephant in the room.”
Green Australia Opportunity
Another part of the change under Looney has been BP’s shift towards cleaner technologies such as wind, hydrogen, biogas and electric vehicle charging infrastructure.
Earlier this year, the British company bought a controlling stake in the world’s largest green energy show – the $52 billion Asian Renewable Energy Center in Western Australia’s Pilbara region.
Looney said the project was in a way a final investment decision.
But he said this is the kind of project needed to make Australia a green energy superpower, especially given the country’s proximity to giant Asian markets.
“If you look at the history of the country…you are also blessed with extraordinary transmission resources,” he said.
“So the concept of can Australia become a renewable energy hub is definitely there.”
Amid this year’s turmoil, Looney expected some relief for beleaguered consumers, saying that slowing economic growth that could tip some developed countries into recession will weigh on oil and gas prices.
He pointed out that for every one percentage point of decline in global economic output, there was a decrease in oil demand by about half a million barrels per day.
“Does the destruction of economic growth translate into lower demand for the product, for the hydrocarbon product?” He said.
“I think the answer to that, on a large scale, is yes. Probably not on the scale that you might think.
“Now, in a system that’s producing or ordering 100 million barrels today… you can see that’s a big number.
“But it’s not incredibly physical, either.”
‘A very difficult time for society’
Energy markets have traded at record levels for most of the past 12 months, drawing scrutiny from governments concerned about supply shortages and rising home and business prices.
Those concerns prompted the UK government in July to impose an unexpected 25 per cent tax on profits made by major energy companies such as BP.
Looney refused to indulge speculation that Australia might implement a similar measure.
There have been suggestions that the Commonwealth could intervene in the energy market by imposing a tax on East Coast liquefied natural gas (LNG) exports.
BP has no investments in the LNG industry on Australia’s east coast, although it owns one-sixth of the North West Shelf project off northwest Australia.
However, Looney said he did not want to speculate about what action the Commonwealth might take, saying these were matters of concern to the government.
“This is a very difficult time for society in general,” he said.
“It is understandable that governments… are looking for ways to help society with this issue.
Different governments around the world are trying different things.
And then, of course, governments have to look at how to finance such energy subsidies.
Buckley disagreed with Looney’s suggestions that investment in new oil and gas projects would be necessary for decades, arguing that it would lead to catastrophic global warming.
Business as usual no choice
The former investment banker said assumptions about the continued need for new oil and gas projects depended on solutions such as carbon capture and storage to prevent carbon emissions.
But he said carbon capture and storage was a miserable failure, and pointed to the faltering efforts by oil major Chevron to bury emissions at the massive Gorgon Project off Washington.
“What Looney paints is a picture that the world is going to go 2.5 degrees [of warming]or he puts his head in the sand – that wouldn’t be his problem because he won’t be CEO in five years,” said Mr Buckley.
“He would have retired his millions.”
Despite the comments, Buckley said Looney deserved credit for trying to steer BP towards cleaner operations.
“The reality is you’ve got Totals, Shells, Chevrons and Exxon all watching what he’s doing,” Buckley said.
And the faster he succeeds, the faster [with which] They will try to repeat his success, and this is very important.
We are talking about some of the largest companies in the world.
“We need their budgets – we need them to stop facing solutions and start investing in solutions.”