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Ex-BP CEO calls for end to ‘demonisation’ of oil and gas industry

A former BP (LON: BP) chief executive has called for an end to “the demonisation of the fossil fuel industry by activists, politicians and the media”.

In an op-ed in The Telegraph newspaper, Tony Hayward, who led the London-listed oil giant between 2007 and 2010, says a change in the rhetoric would encourage energy companies to invest in the transition.

But he conceded that a step change in the narrative around the industry is “probably too much to hope for”.

Mr Hayward’s comments come just days after the Scottish Government unveiled its new, and somewhat controversial, energy strategy.

It included a “presumption against” further oil and gas exploration, effectively laying the groundwork for an accelerated North Sea decline.

Although it is largely ceremonial – energy powers are reserved by Westminster – business leaders pointed out the potentially damaging effect it could have on business confidence.

In his op-ed Mr Hayward, whose time at BP came to an end following the Deepwater Horizon oil spill, set our four areas that governments should be focussing on in order to accelerate the energy transition.

Tony Hayward

As well as ending the demonisation of oil and gas, he highlighted the need to reform the permitting process, deploy new technologies, and reduce demand for power.

Mr Hayward said: “There are two impediments to more rapid renewable energy penetration. Firstly, Government bureaucracy. Across the world the permitting and approval processes and grid connection approval processes for all forms of renewable energy are far too slow.

“Secondly, many new technologies have been proven in the lab and even at the pilot demo scale – but few have been deployed commercially – until that hurdle has been passed the major institutional investors that will provide the capital for the build-out of proven technology are not able to invest at scale in technologies that may fail.

Tim Rue/Bloomberg

He added: “The third area where government has a major role to play is on demand. It is extraordinary that until we were actually in the middle of the current crisis almost no one had focussed on demand and even now it is seen as little more than a short term intervention to manage today’s problem rather than a key strategic plank of any energy policy.

“The final area where we could all take a lead would be to stop, or at least scale back, the demonisation of the fossil fuel industry by activists, politicians and the media so that it can invest more as we navigate a very difficult transition – but that is probably too much to hope for.”

High energy prices to be a ‘feature of the next decade’

Looking ahead, Mr Hayward expects high energy costs to be a “feature of the next decade” due to the “frailty” of the current system, which has been exposed by Russia’s attack on Ukraine.

That stems, he claims, from “how we have chosen to pursue the objectives of the Paris agreement on climate change”.

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The Paris Climate Agreement aims to keep global temperature rise this century below 2 degrees Celsius.

Since the signing of the landmark deal, Mr Hayward says the focus has purely been on energy sustainability, at the expense of oil and gas.

He said: “In the period since Paris the allocation of capital to the fossil fuel industry has been dramatically reduced – it is currently running at around 60pc of the level it was at in the decade prior to Paris and 60-70pc of the investment needed to satisfy current levels of demand – and the hydrocarbons industry has been progressively demonised to the point that it was not invited to COP 26 last year.

“The problem with this is that no one consulted the consumer. There was very little attention paid to the demand side of the equation and to the implications for energy security and prices of withdrawing fossil fuel investment before alternatives are in place.

“Fossil fuel consumption reached an all-time high in 2022 with record consumption of coal, oil and gas and 2023 is projected to be even higher. Hence the high prices.”

Scale and demand

The main challenge to hit the Paris Agreement is renewables deployment at the “scale required”, and continued growth in energy demand.

Mr Hayward added: “The world’s demand for energy continues to grow at between 1 and 2pc a year. According to the International Energy Agency, in order to sustain current levels of output the global energy system requires around $1.5trn a year of investment, principally in fossil fuels.

“But to transition to a low carbon system at the pace we want to, in order to meet the Paris goals, the necessary investment number is more than double that. The current investment into renewable energy is around $1.5trn a year vs a requirement of up to $4trn.”

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2023-01-16 04:16:09

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