Get off your knees!

This is not good news for anyone who holds stock in the companies concerned:

The leaders of 10 of the world’s biggest oil companies have offered their qualified support for a new global treaty on climate change.

The producers of 20% of the world’s oil and gas say they share the ambition to limit warming to 2C.

They promise to work to reduce the greenhouse gas intensity of the global energy mix.

The Oil and Gas Climate Initiative represents major producers including BP, Shell, Saudi Aramco and Total among others.

The Oil and Gas Climate Initiative?  What the fuck is that?  From the link:

The Oil and Gas Climate Initiative (OGCI) enables the oil and gas industry to work together to deliver practical solutions to climate risks.

Practical solutions?  I’m all ears.

Member companies commit to:

– Share best practices to enhance overall standards and environmental performance

– Develop common methodologies to measure climate-related impacts and contributions to solutions

– Design a reporting process that enables the voluntary pooling of efforts and the communication of progress as a group to external stakeholders

– Facilitate and deepen engagement in international multi-stakeholder specific solutions and initiatives as well as the design of shared roadmaps

 – Engage with other industries to identify and build climate related synergies

These must be what pass for practical solutions in the world that CEOs of oil companies inhabit.  For those of us who are, ahem, a bit closer to the drill bit and the heavy-lift crane, these sound less like “practical solutions” and a lot more like “vague, woolly guff”.

Anyone who has been in the oil industry in the past 15 years will recognise all the buzzwords: “best practices”, “solutions”, “methodologies”, “stakeholders”, “roadmaps”, “synergies”.  This bullshit is pumped out at a rate which, if it could somehow be applied to their crude production, would allay the fears of investors for the next thirteen generations.  It is splurged all over the unfortunate industry employees and contractors in a manner which would make Exxon Valdez look like a carefully applied drop into the eye of a newborn babe.

Sifting through all this b0llocks I have managed to identify 3 tangible goals of this initiative:

1) Increasing the share of natural gas in the global energy mix.

2) Reducing methane emissions and “routine” flaring from operations.

3) Improving energy efficiency.

Regarding Nos. 2) and 3), this is stuff that should be being done anyway, and both have been stated goals of oil company operations for at least the past decade.  So why the need for this joint initiative?  As the website says:

Members work together, but each company defines the scope and parameters of their contribution to the initiative.

Which sounds pretty much like your average oil and gas project: everyone working together but doing whatever the fuck they want.

But it’s No. 1 which should worry investors, along with another stated aim of the group:

Developing projects to provide broader access to energy.

Which I take as an attempt to rectify the failings of various governments who, in 2015, have somehow still not managed to ensure their citizens can turn on a light after sunset.

Here’s my problem.  The role of an oil and gas company is to produce oil and gas and provide a return to their shareholders.  The role of an oil and gas company is not:

1) To determine what percentage natural gas should be in the overall global energy mix.  We have these things called “markets” to determine what form of energy the world wants.  This reeks of Soviet-style central planning whereby a handful of very clever bureaucrats decide what tens of millions of people ought to be buying.  The result is a complete mis-allocation of resources.

2) To rectify the failings of corrupt, incompetent governments in providing their citizens with basic services (or an environment which would allow private actors to provide those services).  Most of these people without access to energy live in countries ruled by governments which are corrupt, brutal, incompetent, or any mixture of those three.  Any efforts to bring energy to these deprived populations will only take place with the permission of the host government, who will almost certainly use any scheme to enrich themselves and absolve themselves of the responsibility to sort out the mess they have created in their own countries.

In short, oil companies have no business being involved in what should either be left to markets or is the responsibility of governments.  I’m not even sure this is a sensible objective either:

Developing renewables

Developing renewable energy is undoubtedly a good idea, provided government subsidies don’t skew the results in favour of useless windmills and equally wrong-headed electric cars.  But who in their right mind thinks major oil companies are best placed to develop them?  Seriously, this OGCI group includes PEMEX, the Mexican state-owned oil company.  I’ve written about them before.  Does anybody think that the bowels of a useless, corrupt, state-run behemoth is the best environment in which to develop and roll-out the technologies on which, supposedly, the fate of the earth depends?  Anyone who has worked in a major oil company, even a private one, will know that projects move with the pace of a snail, people are appointed based on their personal connections and conformity rather than ability, and decisions get made only after everyone is absolutely sure that any potential fallout can be safely deflected away from them.  And they rely on having a handy slush fund of several billion dollars with which to hose at the project when the budget inevitably gets blown in week 12.  Hardly the environment in which to nurture risk-taking ventures to develop ground-breaking technologies, is it?  Sheesh, an oil company would take a year – and $100k in jollies for HR zombies – just to come up with an expense reimbursement procedure.  And it would take equally long under this procedure for an employ to get his or her money back.

The notion that oil companies, by virtue of their being involved in energy, ought to be in the business of developing renewable energy technologies is akin to saying horse breeders should have gotten themselves into motor car production, or Ford should have gone on to develop aeroplanes.  I repeat: oil and gas companies ought to concentrate on producing oil and gas and selling their products at a profit, not dabbling in alternative energy in an effort to look good.

And this is what this is all about: it’s PR.  Dim politicians and ignorant sections of the public believe oil companies should not be maximising their efforts in doing what they exist to do, but should instead divert a portion of their resources and cash into an area which they know little about and is, at the moment, a muddled mess full of distorting subsidies, government interference, and scaremongering masquerading as science.  Clearly the CEOs of the participating oil companies think the PR will bring about a net positive return for their shareholders, presumably by improving their companies’ image.  Let’s see how that’s going:

Environmental campaigners were quick to pour scorn on the oil and gas producers’ initiative, saying it would do little to aid the decarbonisation of the global economy.

“The oil companies behind this announcement have spent years lobbying to undermine effective climate action, each and every one of them has a business plan that would lead to dangerous global temperature rises, yet suddenly they expect us all to see them as the solution, not the problem,” said Charlie Kronick from Greenpeace.

“The world should thank them for their offer of advice but politely turn it down. Arsonists don’t make good firefighters.”

Oh dear.  All that arselicking, and the eco-loons still hate you.

The incumbent oil giants are in danger of disappearing up their own arses.  Several of the companies participating in OGCI face enormous challenges in dealing with an oil price hovering around $50 per barrel.  The strategy – and I use that term charitably – of certain players seems to be one of let’s wait for the price to go up instead of “how do we adapt to <$80 per barrel oil”.  The sanctions on Iran are due to be lifted early next year: what’s that going to do to the oil price, do you think?

These CEOs have a duty to their shareholders to make the necessary changes such that they can make money at today’s oil price, not some price of yesteryear which we’re not going to see again for another generation.  And that will involve restructuring the organisations to ensure they have the right people working under a system of management where decisions can get made and projects developed without the costs spiralling out of control and the schedule going in the bin before the first month is out.  This is where the CEOs of oil companies need to concentrate their efforts, not on arselicking PR stunts aimed at cosying up to governments while doing nothing to improve their image with those who despise them anyway.  The whole thing is nothing but a distraction.  They should proudly state that they are in the business of producing oil and gas, and dammit that is what we will do!

I would hope that an appreciation of this point is the reason why ExxonMobil and Chevron are not participating in this nonsense.  Companies whose CEOs take their eye off the ball and start wandering off into the long grass tend not to last very long.

“Oof…sorry, what’s my job again?”


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