Our industry’s dual challenge and its opportunities

The oil and gas industry has a collective dual challenge for the coming decades: to provide more affordable, reliable energy to the world’s growing population, while addressing the climate issue through clean energy. Affordable, reliable, and clean: all three words are equally important.

• Affordable, because cheap energy is necessary to spur the economic development of billions of people seeking better living conditions; and all polls indicate that it is the number one priority for all customers around the world;
• Reliable, simply because people expect energy to be readily and continuously available in their daily lives;
• Clean of course, because we need to reduce our environmental footprint and CO2 emissions.

It would be a mistake to put more emphasis on clean than on affordable and reliable, because a stable, sustainable world requires an abundant, readily available and cheap energy. And in reality, in most of the countries, in particular the emerging ones, the top priority is to have access to a cheap energy because it is a cornerstone of their development. But at the same time, we need to integrate the climate issue into our strategy and this can definitely be a source of opportunity.

Below, I have tried to summarize some of the consequences of this dual challenge for the oil and gas industry.

First, we are in an industry with long time horizon and, whatever the current difficulties, we need to prepare for the future. Our decisions today should not endanger our long-term strategy. In other words, we need to continue investing today to make sure that we will be in a position to meet demand decades from now. We cannot forget the long-term view.

Second, we already know today that, because of climate concern, not all oil resources are going to be developed. For this reason, we have to focus on the competitive oil assets that are resilient whatever the prices, with the lowest impact on the environment; by so doing, we will avoid the risk of stranded assets. And investing during the low cycle, because costs are lower, is the right way to develop such competitive oil assets.

“Clean solutions have to be and cannot be other than economical ones”

Third, we have to advocate decisions that will favor natural gas, because natural gas is the cleanest and most flexible fossil fuel, making it the perfect companion for renewable energies, which are intermittent by nature. Substituting coal with gas in power generation is certainly the easiest and fastest way to curb CO2 emissions. Carbon pricing mechanisms are therefore needed in all economic regions. Businesses are rational; if there is no cost associated with carbon emissions, they will go on using coal, the cheapest and most abundant fossil fuel, and the world will not meet the +2°C target set out in the Paris Agreement. Clean solutions have to be and cannot be other than economical ones. This is also why our industry need to work hard to lower the cost to produce and transport gas up to the end customers – we have to make gas as more competitive than coal : by lowering its costs and by giving a price to the CO2.

Fourth, we need to develop technologies as the Carbon Capture Use and Storage (CCUS) technology without which we will not be able to achieve carbon neutrality in the second half of this century while continuing to consume hydrocarbons. This is one of the major targets of the Oil and Gas Climate Initiative (OGCI) launched by the oil and gas industry three years ago in Davos and today led by ten of the industry’s Chief Executive Officers, including me, representing more than 20% of global oil production. The OGCI is aimed at fostering collaborative efforts to have a material impact on greenhouse gases emissions and to address the climate issue.

“Addressing the climate change issue will create new business opportunities”

Lastly, we have been dealing with the energy markets and energy issues for a long time. The oil and gas industry has the technical skills and the financial resources to do this. We are in the best position to develop the new energy sources and technologies necessary to limit global warming. Addressing the climate change issue will create new business opportunities in the development of renewable energies and energy storage technologies (which are essential for profitable solar and wind businesses), as well as in offering our customers new products and services that will allow them to improve their energy consumption and reduce their environmental footprint.

This is why at Total we are developing a profitable low carbon business. Several years ago, we acquired SunPower, which is now a major player in solar energy, and last year, we purchased Saft, a world leader in high-technology batteries, and Lampiris, a company that supplies natural gas and electricity to private consumers thanks to digital technologies.

There is indeed no doubt that all of this will be spurred by digitalization, moving from a centralized business model of energy distribution to decentralized ones, where more and more consumers will also become producers.

It is also obvious that technology is playing and will continue to play a central role. Further improvements will again help us in the future to develop new affordable energy sources, improve efficiency at each step of the value chain, and reduce carbon emissions and the environmental footprint of human activities.

I strongly believe that, like we have always done in the past, we will find within each other the answers needed to address our future challenges.

I’m also convinced that, for our companies and particularly those of us with a long-term view, the future will be full of opportunities – provided we remain open, agile and flexible enough to grasp them – and those opportunities will in turn help to improve the living conditions of billions of people.

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