Home' Trinidad and Tobago Guardian : June 4th 2015 Contents BG20 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt JUNE 2015 • WEEK ONE
Oil companies that have
pumped trillions of barrels
of crude from the ground
are now saying the future
is in their other main prod-
uct: natural gas, a fuel
they're promoting as the logical successor
With almost 200 nations set to hammer
out a binding pact on carbon emissions in
December, fossil-fuel companies led by Royal
Dutch Shell Plc and Total SA say they're
refocusing on gas as a cleaner alternative to
the cheap coal that now dominates electricity
That's sparked a war of words between
the two industries and raised concern that
Big Oil is more interested in grabbing market
share than fighting global warming.
"Total is gas, and gas is good," chief exec-
utive officer Patrick Pouyanne said Monday,
in advance of this week's World Gas Con-
ference in Paris. His remarks echoed com-
ments two weeks earlier by Shell CEO Ben
Van Beurden, who said his company has
changed from "an oil-and-gas company to
a gas-and-oil company."
Shell began producing more gas than oil
in 2013 and Total the following year. Exxon
Mobil Corp's output rose to about 47 per
cent of total production last year from 39
per cent six years ago. Companies are pushing
sales in China, India and Europe.
Coal from producers led by Glencore and
BHP Billiton Ltd produces about 40 per cent
of the world's electricity. Shell, Total, BP and
other oil companies said Monday in a joint
statement that they're banding together to
promote gas as more climate friendly than
"The enemy is coal," Pouyanne said Mon-
day. He vowed to pull out of coal mining and
said Total may also halt coal trading in Europe.
A key strategy for gas producers to push
this agenda is asking governments to levy a
price on carbon emissions from power plants.
That creates an economic incentive to switch
from coal, the top source of greenhouse gases,
to cleaner options.
BP CEO Bob Dudley called for a carbon
price at the company's shareholder meeting
April 16, while Exxon head Rex Tillerson on
May 27 reiterated support for a carbon tax
if consensus emerges in the US.
Even without carbon pricing, gas has been
displacing coal in the US, Tillerson said in
"Natural gas use in the US has reduced
carbon dioxide emissions to levels not seen
since the 1990s," he said in a speech. "And
the U.S. has no comprehensive cost of carbon
Dudley, Tillerson, Pouyanne, Van Beurden
and Statoil ASA's chief Eldar Saetre will join
Chevron Corp. head John Watson at the con-
ference in Paris this week to discuss ways to
promote gas as the main fuel for a clean and
"They promote gas because it's already
part of their business," said Michael Barron,
director of global energy and natural resources
at the risk adviser Eurasia Group. "In many
ways gas makes a contribution to moving
toward a lower carbon economy. But it'll all
depend on the economics."
Drilling for oil often yields both crude and
gas, and in recent years the major producers
have stepped up their focus on gas. That
shift is accelerating, with billions spent on
adding to gas operations, which have his-
torically generated less money than oil.
"More gas is the absolute key," Shell's Van
Beurden told shareholders at the company's
annual meeting May 21.
In April, Shell agreed to pay US$70 billion
to buy BG Group Plc, mainly a gas company.
Exxon is starting gas fields and liquefied nat-
ural gas export projects in Papua New Guinea
to supply Asia, and Total is investing in Rus-
"Coal is not the target," said Joan Mac-
Naughton, who served as executive chair of
a World Energy Council climate-change
report released last month. "The target should
be emissions. It's true that gas is half as emit-
ting as coal. You could say it's twice as clean,
or you could say it's just half as dirty."
Big Oil still has its work cut out, given the
economics of coal. In fast-growing Asia,
which accounts for about 70 per cent of
world coal use, prices for the fuel have
declined every year since 2011, driving down
costs for electricity.
"It's a question of affordability," said Philip
Garner, director general of the UK trade group
CoalPro. "Coal is a much more abundant
resource than oil and gas, and countries that
have it can't be asked to stop using it because
more than a billion people still live without
Coal-fired power must drop to about 30
per cent of global generation by 2025 to meet
a goal of limiting the increase in global tem-
perature to 2 degrees Celsius (3.6 degrees
Fahrenheit), according to the International
Coal companies are betting on carbon cap-
ture and storage, which vacuums out carbon
dioxide before it enters the atmosphere, to
keep themselves in business in the face of
demands for cleaner energy, Garner said.
Technologies that clean coal of impurities
will also be a part of the industry's defense.
"No one is suggesting switching off all
coal plants because half of the planet will be
in the dark," Gerard Mestrallet, CEO of French
utility Engie, said on Tuesday in Paris. "What
is important is a switch in the mix, which
now gives a central role to coal." Bloomberg
Brazilian state-run oil company Petrobras is con-
sidering selling some of its assets in the Gulf of
Mexico as part of a divestment plan to shore up its
finances, local daily Folha de S Paulo reported on
Petroleo Brasileiro SA, as the company is formally
known, has hired BNP Paribas to study the possible
sale of its stake in off-shore oilfields in the region,
which are worth about US$8 billion, the newspaper
said without citing sources.
Officials with Petrobras and BNP Paribas were not
immediately available for comment.
Facing a corruption scandal that has dragged down
its market value, Petrobras, one of the world's most
indebted companies, said in March it plans to sell as
much as US$13.7 billion in assets this year and next
to reduce debt and protect cash.
In 2013, Petrobras had trouble selling fields in the
Gulf of Mexico as the value of those assets fell at the
Mexico's oil regulator voted on
Friday to relax previously
established rules on bidding
terms and contracts that form
the first step in a historic sec-
tor opening that kicks off this
summer with the public auction of 14 shallow water
The July auction will mark the first of five packages
of oil fields up for grabs, part of a so-called Round
One tender that follows a major energy reform
approved by Congress last year.
The constitutional reform ended the decades-
long monopoly enjoyed by state-owned oil company
Pemex and aims to reverse a decade-long slide in
Mexican crude output.
Responding to complaints from private and foreign
companies, the national hydrocarbons commission,
or CNH, eliminated caps on how many contracts
firms can bid on. It also reversed a rule that would
have required them to destroy the geological data
they purchase for fields they are not ultimately
The CNH voted to give the Finance Ministry more
oversight over the long-term development plans
and annual work programme budgets of each con-
The regulator also signaled an adjustment in the
14 contracts' fiscal terms by putting greater emphasis
on companies' ability to recover costs during the
contract's exploratory phase, without giving addi-
"The modifications strengthen the control of the
state and oversight of the contracts, as well as make
the contracts more flexible in recognition of geological
reality and market conditions," said CNH President
Juan Carlos Zepeda.
Earlier rules would have limited oil companies to
making just five bids among the initial 14 shallow
water exploration blocks located along the southern
rim of the Gulf of Mexico.
The CNH also voted to reverse an earlier restriction
that would have prohibited oil companies that seek
to operate fields as part of a consortium, from
bidding on additional contracts outside the con-
sortium as an individual company.
The commission further scrapped a rule that
would have required companies that seek to operate
a field within a consortium to hold the largest stake.
The updated rule requires operators to have a
minimum one-third stake while its consortium part-
ners can have a larger stake. Reuters
Big Oil's plan to
become big gas
Mexico lifts bidding
limits for first batch
of oil tenders
selling Gulf assets
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