In early 2023, bp forecast that the reliance on and, therefore, the demand for oil and gas would decrease significantly as the energy market adopts more sustainable fuels. A short time later, however, the company reported record sales of petroleum products for 2022 and then stepped away from previous pledges to reduce carbon. bp was not alone. In 2023, both Shell and Exxon also pulled back on plans for cutting carbon emissions in the aftermath of 2022’s financial success.
“We cannot justify going for a low return,” Shell CEO Wael Sawan said in a media call in February 2023. “Our shareholders deserve to see us going after strong returns. If we cannot achieve double-digit returns in a business, we need to question very hard whether we should continue in that business. Absolutely, we want to continue to go for lower and lower and lower carbon, but it has to be profitable.”
Can companies like bp, Exxon, and Shell continue to invest in hydrocarbon production and make a transition to cleaner fuels that will ultimately get us to net zero? My belief is that these companies want to remain at the forefront of the energy transition and, therefore, not only can do so, but will do so. Their profitability today – if they invest strategically – will fund their profitability of the future.
Tisha Schuller, founder of Adamantine Energy, has an expression: “Say yes to both.” Hydrocarbon leaders today don’t have to abandon their most lucrative product. They can say yes to revenue and yes to investments in the future – alternative fuels that will achieve the net zero reality we need. They can, and must, play both a short and a long game. They can harness the power of today’s profits and use those profits to invest in a more sustainable future.
Achieving net zero is a challenge of such magnitude that it will require the participation of large companies with access to capital, employees, and distribution. The energy transition is a global-scale challenge, so we need global-scale companies to be part of the solution. We cannot achieve a net zero future without them. To be relevant in the future, they have to think about the day when petroleum reserves run thin.
Saudi Aramco makes a good case study. Saudi Aramco is now more valuable than the next ten largest energy companies combined. Last year it pulled down $161 billion in profits. Today, the company is, by all measures, performing well, but tomorrow is uncertain. Exactly how much oil remains under the sand in Persian Gulf countries is a closely guarded secret. The expectation is, however, that Bahrain is likely to run out of oil within the decade, Oman in two decades, and the Kingdom by the end of the century, possibly sooner.
When it comes to the energy transition, the history books (prediction: history books will still exist!) will talk about the 2020s as the decade when the journey to net zero began in earnest. Carbon intensity – a measure of how clean our electricity is by how many grams of carbon dioxide are released to produce a kilowatt hour (kWh) of electricity – became the best measure of progress and, when that happened, the floodgates of innovation opened for renewable liquid fuels.
Many assumed the clean-energy transition was to be an evolution from liquids and gases to solids or, put another way, that we would be replacing oil with batteries made of minerals like lithium, cobalt, and nickel. That assumption turned out to be wrong. Despite widespread criticism of liquid fuels and a push to eliminate them, we achieved net zero by investing in a variety of liquid fuels.
In an ironic twist of fate, it was a new table published by the California Air Resources Board (CARB) – an early leader in electrify-everything conversations – that paved the way. The Low Carbon Fuel Standards Pathway Certified Carbon Intensities report showed the remarkable opportunities ahead. Just a few examples from that report comparing the carbon intensity of liquid fuels made in 2023 are shown below. A negative carbon-intensity number means the fuel takes more carbon out of the environment than it produces.
- Dairy Manure Biogas to Electricity -762.09
- Food Scraps to Compressed Natural Gas -79.91
- Landfill Gas to Hydrogen -12.65
- Solar or Wind to Electricity 0.00
- Used Cooking Oil to Biodiesel 8.63
- Corn Stover to Ethanol 21.58
- Used Cooking Oil to Jet Fuel 26.05
- Organic Waste to Propane 33.00
- Sugarcane Molasses to Ethanol 40.84
- Soybeans to Biodiesel 50.85
- California Grid Electricity 81.49
- CA Grid Electricity to Hydrogen 164.46
Why is grid electricity in California higher in carbon intensity than many liquid fuel products? The California grid was mainly energized by natural gas and (in 2023) was still powered to a smaller extent by coal. Trillium, a transportation fuels producer in Houston, Texas, put the above numbers in more perspective. [Its] data showed the carbon intensity of conventional diesel to be 100.10. Gasoline is very close to the same number. Renewable natural gas converted from dairy waste is remarkably low, at -283.27.
In all, the CARB report detailed more than 1,700 examples of low-carbon intensity liquid fuels. The substantive point is that anything below 100 was an improvement, and many kinds of low-carbon intensity fuels using many types of manufacturing methods were already in place in 2023.
In 25 years, the innovation gains in liquid fuel carbon intensity will mean that dozens of formerly high carbon applications – shipping, trucking, generators – are all fueled by low to negative carbon-intensive fuels.
Excerpted with permission. From Path to Zero: 12 Climate Conversations That Changed the World by Tucker Perkins (Worth; September 2024).
Tucker Perkins is an energy expert with four decades of experience in the liquid and renewable fuels arena. He is a frequent keynote speaker to national and international audiences on energy topics and a commentator for major media outlets and the Schwab Network. His favorite topic is the future. His wide-path perspective embraces an array of pragmatic solutions for reducing greenhouse gas emissions.
Perkins also hosts the Path to Zero podcast, in which he engages a variety of thought leaders in provocative discussions regarding energy and climate change. He has interviewed over 100 experts on subjects ranging from internal combustion engines to nuclear fusion, electrification, and environmental justice.
He is the president and chief executive officer of the Propane Education & Research Council (PERC), a position he’s held since 2017.
Perkins has a BS in civil engineering from Virginia Tech and an MBA from the University of Richmond. He and his wife Liz reside in Richmond, Virginia.
For more information, visit pathtozerobook.com.
Oil and gas operations are commonly found in remote locations far from company headquarters. Now, it's possible to monitor pump operations, collate and analyze seismic data, and track employees around the world from almost anywhere. Whether employees are in the office or in the field, the internet and related applications enable a greater multidirectional flow of information – and control – than ever before.