Birol: CCUS a ‘huge opportunity’ for industry
International Energy Agency head calls on oil and gas companies to invest in non-core assets including CCUS and clean energy to maintain their social license
Global oil and gas companies have a “huge opportunity” to “get a social license in the fight against climate change” by pushing carbon capture, utilisation and storage (CCUS), Fatih Birol, executive director of the International Energy Agency (IEA), told delegates at IP Week in London.
The energy sector is responsible for approximately three-quarters of greenhouse gas emissions he told the Energy Institute’s flagship event, which was dominated by climate change. “But there are ways, options, that we can use to reduce [energy sources’] carbon footprints.”
Birol chaired the World Economic Forum’s energy advisory board meeting in Davos for the fourteenth time at the end of January. “It is the first time I have seen climate change dominating all the discussions... of the government leaders, the investors, the energy industry, everyone. The main topic was emissions.”
Global CO₂ emissions in 2019 did not exceed those of the previous year, to widespread surprise, according to IEA data, due to the very strong growth of renewables, natural gas replacing coal and an increase in nuclear generation. He says the UK “is definitely one of the drivers” while EU and US emissions declined substantially and so did those of Japan.
Despite the IEA identifying this “very strong transition towards clean energy” he notes that between 2000 and 2018 global coal consumption increased 65pc, mainly due to developing Asia economies.
Likewise, global demand for oil, under existing government policies, will continue increasing, albeit at a much slower rate than in the past. “The price of oil may not be in line with what oil producing countries would like to see… there is a double challenge for those countries,” he notes.
Under currently implemented government policies, the global temperature will increase more than 4°C above pre-industrial levels by the end of the century, which he says, “would have catastrophic implications for all of us”. But even if all policies that have been promised were implemented, this reduces the rise only to 3°C, which is still well above the COP25 Paris Agreement target of ‘well below’ 2°C. “We have to bring emissions down,” he says.
The IEA has identified three major areas through which this can be achieved: efficiency, renewables and clean energy technologies. Efficiency improvements and renewables are the “two bedrocks” for reducing emissions, says Birol. “The most critical technology, in my view, is carbon capture utilisation and storage (CCUS).
“The one message I want to give is—looking at the order of magnitude of the challenge—is that it is impossible to come to the desired level of emission reduction only by one fuel, one solution. If we take it seriously, we need all clean energy technologies implemented.”
Birol acknowledges that oil and gas companies face a major challenge in balancing the short-term profits demanded by shareholders with the need to hold a social license to operate. “How they balance this is important,” he says. “Not one day passes without a new announcement, a new opinion on this issue.”
He says that the oil and gas industry is not investing enough into renewables and clean energy technologies; just 1pc of capex globally is invested in so-called non-core business, according to an IEA report published in January. “There is substantial room to improve to quantify [that] we are investing in both domains,” he says.
Under currently implemented government policies, the global temperature will increase more than 4°C above pre-industrial levels by the end of the century
“Oil and gas companies, in my view, may be a very important driver of clean energy transitions because these companies have huge engineering experience,” he says, while also noting that they have deep pockets. “They can push some of the technologies which are not mature enough… such as CCUS, such as hydrogen.”
“Given the important challenges we face in terms of climate change… it is important [to have a] clear direction. Just as important, is the pace of the transition,” says Birol. “It is the IEA's job to lead the global clean energy transition and... In the next 10 years, see a big decline in the global carbon dioxide emissions.”