Russia's Sechin and West's oil CEOs agree: the current transition strategy is "unrealistic"

They call for the process to be "inclusive"

And bioblends could become paramount

A decarbonisation plan in the oil and gas sector is underway, but it’s difficult, capital-intensive and will take a very long time. What’s more, it needs the support of global governments and civil society. Biofuels, and in particular bioblends could help in the process. This is what emerged from a forum in Verona, Italy, where key oil and gas players convened to discuss the future of energy.

“Even in the long term, renewable energy will not be able to completely replace conventional energy sources”, Igor Sechin – CEO of Russia’s oil giant Rosneft – said in a panel discussion, while Neil Chapman, Senior VP of ExxonMobil, explained how biofuels and integrated refineries are part of their “flexible strategy” to decarbonise.

Scheduled shortly ahead of COP26 and G20 Summit, the XIV Eurasian Economic Forum largely addressed the global oil and gas crisis and looked for answers to a crucial question: with more than 80% of global energy demand still met by fossil fuels and climate change largely driven by energy production, how is the energy sector going to decarbonise in a timely manner without massively slashing energy production – which would greatly disrupt the way we live?

Russian oil and gas companies, international oil companies, commodity traders, supply chain managers and ministers used the opportunity to voice their frustration with the current energy transition strategy. They think that the strategy is unrealistic and is the cause of the current energy crisis. As a way forward, they called for an inclusive energy transition that sees hydrocarbons as part of the transition. Together, all energy producers would work towards becoming low-carbon.

"THE ENERGY TRANSITION NEEDS OIL AND GAS"

At a keynote speech, Rosneft’s CEO Igor Sechin conveyed that oil and gas are still very much needed despite the current narrative stating the opposite. He argued that as we stand – with 84% of the global energy coming from fossil fuels and 11.4% from renewables – the renewable capacity can impossibly meet the current energy demand. Phasing down fossil fuels without having properly ramped up renewables, he said, would negatively affect the supply of energy and lead to shortages. This would require consumers to drastically reduce their energy consumption, which, in his view, is a violation of human rights.

In support of his prediction, he cited a 2021 low-carbon forecast by the International Energy Agency that assumes a carbon neutral scenario in 2050 with conventional energy sources still meeting 39% of global demand (fig. 5).

Bernard Looney, CEO of BP, and Neil Chapman, Senior VP at ExxonMobil, both concurred and confirmed that their respective companies will keep focusing on hydrocarbons “for a long time”. Mr Chapman explained Exxon’s decision by arguing that “oil is the energy carrier that produces the lowest price per barrel, with the lowest carbon footprint with more efficient and clean operations” – a statement that the gas sector later claimed for themselves.

Ivan Glasenberg, former CEO of Glencore – the multinational commodity trading and mining company – added that shutting off hydrocarbons is not the way to speed up an alternative. “This way of reasoning is as delusional as stopping the Encyclopaedia Britannica in the hope to discover Google,” he said.

"ENERGY TECHNOLOGIES NEED A FAIR ASSESSMENT"

On the subject of low-carbon energy, Mr Sechin elaborated at length and stretched the importance of adopting a comprehensive approach that includes the entire process chain when assessing the carbon intensity of any energy technology, as well as the safety for people and the environment. The assessment has to be fair and transparent, he concluded, and the same level of scrutiny has to apply for all energy technologies.

Nuclear, hydrogen and hydro all challenge, in his view, safety by posing environmental hazards due to residue disposal, explosion risk and flooding requirements respectively. Wind and solar, on the other hand, increase their carbon intensity when assessed over their full life cycle. The raw materials needed for their production, for instance, generate high emissions at extraction and processing, with rare-earth metal neodymium used for wind turbines having 50 times the emissions of steel (fig.2). Furthermore, wind and solar infrastructure has a shorter life than gas plants (fig.3.); it has high end-of-life disposal costs (30 times higher than regular disposal for solar) and high land requirements. Mr Sechin also warned about potential turf wars arising from the concentration of raw materials in a few countries.