The Energy Industry Is Ready To Meet The Climate Change Challenge

 

Recently, corporations have demonstrated a very high level of awareness of the stakes of climate change and the related challenges. The major agreement brokered at the COP21 talks in Paris provided the framework we were waiting for and will allow us to invest even more in cleaner technologies.

 The energy industry is at the center of the climate change debate. We would never have been able to get the CEOs of eight major international oil and gas companies to collectively recognize the need to keep global warming below 2°C, as we did in Paris last October, if there had not been a widespread realization of the issue's critical importance. I am proud that we all managed to agree on making a joint declaration that strengthens our commitment and makes it even more tangible.

 As an energy producer and supplier, our mission for the coming decades will be to meet the dual challenge of satisfying the world's growing energy needs in a reliable and competitive way and helping to fight against climate change. Around 40% of global CO2 emissions are attributable to oil and gas-based products, so there is no doubt that this issue concerns us. That said, in light of our technical and scientific capabilities, our experience in the energy business and our human and financial resources, we are convinced that we are part of the solution.

We need to integrate climate change into our strategy

In its 2°C scenario, the International Energy Agency (IEA) assumes that worldwide energy demand will rise by 12% between 2013 and 2040, due primarily to population growth and economic development. This is, in fact, a low estimate that implies very major improvements in energy efficiency to keep demand under control. Clearly, contributing to this movement by providing products and services that help people reduce their consumption is a first area for action. 

On the supply side, the IEA scenario foresees a considerable expansion in solar and wind power during the period, with an annual increase of nearly 9% widening their share from 1% to 10% of the total energy mix. The IEA also believes that oil and gas will remain in the picture and account for nearly 45% of the energy consumed worldwide in 2040. This assumes that technologies will have been developed to capture and store or transform carbon dioxide within that time frame.

For a Group like the one I lead, these forecasts imply a number of factors that we need to integrate into our strategy so that we can meet these two challenges sustainably and simultaneously.

To start, we need to continue to invest in our core business – oil – to offset the natural decline in output from currently operating fields and serve customer needs, notably in the area of transportation. However, we have to be increasingly selective in our oil-related investment projects, because demand will contract under the 2°C scenario, requiring us to ensure that our projects are among the most competitive in terms of production costs. According to this scenario, not all of the planet's fossil resources will be extracted – only the most competitive will. As Saudi Arabia's former oil minister, Sheik Yamani, said: "The Stone Age didn't end for a lack of stone".

Companies in the energy industry must contribute to the fight against climate change

 At the same time, companies in the energy industry must contribute to the fight against climate change. This is our second challenge. At Total, our vision and involvement are embodied in our "Committed to Better Energy" baseline. There are five key avenues to achieving this ambition:

·         Promoting the development of natural gas, the least polluting fossil fuel. Producing half the emissions of coal in electricity generation, natural gas is the ideal partner to renewable energies, which are intermittent by nature. At the international level, I launched a call last June with five other oil and gas industry leaders to implement carbon pricing mechanisms. This tool will accelerate the necessary shift from coal to natural gas. At Total, the share of natural gas in our output has grown from around a third to half over the past ten years. In keeping with this movement, we have decided to withdraw from all coal-based operations.

·         Investing in renewable energies. At Total, we have chosen to focus on photovoltaic solar energy and biofuels. Our SunPower solar affiliate ranks second worldwide and offers the most efficient technology. In another recent example, we decided to convert our La Mède refinery into France's first biorefinery to produce biodiesel and biojet fuel. Over the next few years, we plan to invest more than $500 million a year in renewable energies, which will account for at least 10% of our portfolio in 15 years' time.

·         Continuously improving energy efficiency, both within the company and for our customers. At Total, we have set a target of improving our facilities' energy efficiency by 1.5% a year over the 2012-2017 period. In addition, we reduced flaring of associated gas at our fields by 50% between 2005 and 2014, and intend to completely phase out routine flaring by 2030. To help our customers lower their consumption and environmental impact, we provide more than 70 products that have been awarded the EcoSolution label. One example is polypropylene, a plastic that allows carmakers to reduce vehicle weight, and therefore fuel consumption.

·         Facilitating universal access to cleaner, decentralized energy.Some 1.3 billion people worldwide still have no access to electricity and around twice as many continue to rely on wood alone for cooking. Total has launched a vast program to sell solar lamps, primarily in Africa. Known as Awango, the program currently reaches nearly six million people. Our goal is to increase that number to 25 million by 2020.

·         Participating in international initiatives to promote the reduction of greenhouse gas emissions. The goals here are to collaborate on improving technologies such as carbon capture and transformation; to participate actively in global programs to set an internal carbon price, like the one championed by the United Nations Global Compact; and to pursue our actions within the Oil & Gas Climate Initiative, of which we are a founding member.

Collective awareness of the urgent need to address climate change is a reality for our companies, and the agreement reached in Paris has strengthened our commitment to integrating this factor into our strategies. I am fully convinced that we energy producers and suppliers have a meaningful role to play, as well as tangible solutions – some of them already on the market – in responding to this global challenge of the 21st century.

                                                    by Patrick Pouyanné, Chairman and CEO of Total