From ambition to action on climate how is an oil company responding

Bjørn Otto Sverdrup, Senior Vice President, Sustainability, Statoil

In 2016 we saw the Paris climate agreement ratified and brought into effect at high speed. The agreement was a call for government and business action. At my company, Statoil, we have decided to take a proactive approach and actively shape the energy transition, a key discussion topic at Abu Dhabi Sustainability Week. To be able to do something about the climate challenge, we need to change how we use and produce energy, simply because our energy systems are responsible for nearly two-thirds of all man-made emissions. Changing the world’s energy mix is not easy. It will take time. Even with an exponential increase in investment in alternative energy, most forecasts predict that fossil fuels will still make up a large share of the energy mix in 2040. Less than the 80% share of today, but almost certainly well over 50%. To supply more energy for a growing population while emitting less greenhouse gas requires a collective leap of the imagination and technology development. We all share this responsibility. Governments need to implement visionary policies. Consumers need to change the ways they use energy. And energy companies like mine need to continuously drive operational efficiency to lower emissions and costs.

At Statoil, we don’t question climate science, we act on it and see the transition to low-emissions energy as a key driver of our business. We now embed climate action into our business strategy and the management of the company in new and profound ways. Statoil’s effort to tackle the climate challenge is built on two pillars: First, we position ourselves to capture the growth and value creation opportunities offered in renewables and new energy solutions. Second, we will continue to be a world leading oil and gas company recognised for leading energy efficiency and the lowest carbon emissions.

We have ramped up our offshore wind business with new developments in the UK and Germany, and later this year we will open the world’s first floating offshore wind farm off the coast of Scotland. Collectively, these projects will supply 1 million households with renewable electricity. Through our US$200 million venture capital fund and the new US$1 billion Oil and Gas Climate Initiative fund, we are dedicated to investing in attractive and ambitious growth companies in low carbon solutions. We believe carbon capture and storage technology will be vital, based on 20 years of experience from our Sleipner field, where we have safely stored 16 million tonnes of carbon emissions.

Despite strong growth in renewables, the world will continue to rely on fossil fuels for decades. How we produce oil and gas, and which resources we develop, will therefore be increasingly important. We need producers who can deliver energy at low cost, with low emissions. We are focusing on reducing the carbon intensity and cost of our oil and gas assets, to build a resilient portfolio for the future. Statoil is a world leader in carbon-efficient oil and gas production. This is the result of determined efforts over decades. The carbon intensity of our upstream production is currently around 10kg per barrel of oil equivalent, compared to an industry average of 18kg. We have now set ourselves a target of reducing that to 9kg by 2020. Indeed, the Carbon Disclosure Project ranked Statoil in first place for readiness for a low carbon future among oil and gas companies.

At Statoil we believe we can make a difference and both improve our business and help meet the climate challenge. Yet, the scale of change that is necessary requires businesses and sectors to mobilise, and consumer behavior to change. Sound policies are essential to encourage what we need to see more of and reduce what we need less of.

Two policies can be particularly effective: Firstly, a price on carbon is probably the most efficient policy instrument to accelerate a change in the energy mix and to shift behaviour among both producers and consumers. Secondly, if policy makers are serious about tackling climate change, dramatically and rapidly reducing the amount of coal in the energy mix is an obvious and urgent priority. Coal emits twice as much carbon emissions as natural gas when consumed. Since coal is mainly used for power generation, renewables and natural gas are better alternatives. We see how this is working in the United States, where emissions from the power sector have been cut 12% in the past decade due to the switch from coal to natural gas. Last year alone, 100 coal plants closed down, and natural gas for power generation grew 19%. As part of their climate strategies, the United Kingdom plans to close its last coal-fired power station in 2025, and Canada will follow by 2030. The potential is even bigger in the rest of the world.

The energy transformation needed is tremendous and change will take time. In order to be successful we need responsible governments, responsible consumers and responsible companies willing to take the lead. At Statoil, we are ready to do our part.