From talking the talk to walking the walk

Author Konstantin Rozhnov

The oil and gas industry is generally of little interest to an outsider, other than for its impact on the environment and prices at the pump.

The oil and gas industry is generally of little interest to an outsider, other than for its impact on the environment and prices at the pump.

But the industry itself often wants the outsider — from an ordinary consumer to a potential investor or a government official — to understand the language it speaks, because it’s their behaviour that, in various ways, will determine the trajectory of the industry in its transition towards a lower-carbon future.

About 80pc of the world’s population would like to have access to the services, mobility and utilities that people in the richer parts of the world enjoy. To get there, they require energy, Shell upstream director Andy Brown told the IP Week conference in London this week.

“How they get access to that energy will be the crucial part of how this transition works, and consumer behaviour during this period of time will be crucial in determining how the world satisfies its energy demand,” he said.

He used a very hip example of the interplay between consumer choice and environmental costs — the iPhone (other varieties of phone are available). Making an iPhone generates over 80kg of CO2, and it requires 30 countries to manufacture parts, with 600 businesses involved, with component parts covering a combined distance of 250,000km to come together for assembly, Brown said. With 1bn iPhones sold so far, the gadget has effectively generated 80mn t of CO2 emissions over the last 10 years, double the annual rate of London’s emissions, he calculated.

“It is about consumer choices, it is about recognising [that] the clothes we wear, the house we live in, the car we drive will determine energy demand and will determine how much oil and gas and other sources of energy will be required in the future,” Brown said.

His words recall those remarks by BP chief economist Spencer Dale, who recently suggested that 3D printing could change the global energy picture going forward by reducing the need to ship goods from one part of the world to another.

The oil and gas industry has now lived in the world of lower oil prices for two and a half years, and the struggle to cut costs is getting tougher with the obvious measures taken long ago. Cue earnest head scratching, self-criticism sessions, and not a little business school rhetoric.

The main problem is not really the price of oil being low, but rather the fact that “we have become inefficient as an industry”, service company Amec Foster Wheeler’s oil, gas and chemicals president John Pearson, said.

“The good news is — we did it to ourselves, and we can undo it again,” he said. The bad news? “Words are so easy — just like go on a diet, get fit, drink less. Pretty easy to say, quite hard to do,” he said.

“We need to innovate — another super easy word,” Pearson said. “Have you tried innovating? It is really easy to innovate. You do not get prizes for innovation. You get prizes for skilled deployment of innovation to make money for oneself and one’s customers. That is what you need to do, and that is hard.”

“To get big sustainable value, you have to collaborate across the supply chain. You cannot get any more buzz words in one sentence, but it is true,” he said. “If I decided that a soccer match would go better with 15 players and 15 guys would just turn up on the field, it would not work very well. We have to work together to redesign the rules of the game we want to play.”