US: Oil Giants Loath to Follow Obama's Green Lead
The Obama administration wants to reduce oil consumption, increase
renewable energy supplies and cut carbon dioxide emissions in the most
ambitious transformation of energy policy in a generation.
But the world's oil giants are not convinced that it will work. Even
as Washington goes into a frenzy over energy, many of the oil companies
are staying on the sidelines, balking at investing in new technologies
favored by the president, or even straying from commitments they had
Royal Dutch Shell
said last month that it would freeze its research and investments in
wind, solar and hydrogen power, and focus its alternative energy
efforts on biofuels.
The company had already sold much of its solar business and pulled out
of a project last year to build the largest offshore wind farm, near
a company that has spent nine years saying it was moving "beyond
petroleum," has been getting back to petroleum since 2007, paring back
its renewable program. And American oil companies, which all along have
been more skeptical of alternative energy than their European
counterparts, are studiously ignoring the new messages coming from
"We don't oppose alternative energy sources and the development of
those. But to hang the future of the country's energy on those
alternatives alone belies reality of their size and scale."
The administration wants to spend $150 billion over the next decade
to create what it calls "a clean energy future." Its plan would aim to
diversify the nation's energy sources by encouraging more renewables,
and it would reduce oil consumption and cut carbon emissions from
The oil companies have frequently run advertisements expressing
their interest in new forms of energy, but their actual investments
have belied the marketing claims. The great bulk of their investments
goes to traditional petroleum resources, including carbon-intensive
energy sources like tar sands and natural gas from shale, while
alternative investments account for a tiny fraction of their spending.
So far, that has changed little under the Obama administration.
"The scale of their alternative investments is so mind-numbingly
small that it's hard to find them," said Nathanael Greene, a senior
policy analyst at the Natural Resources Defense Council. "These companies don't feel they have to be on the leading edge of this stuff."
Perhaps not surprisingly, most investments in alternative sources of
energy are coming from pockets other than those of the oil companies.
In the last 15 years, the top five oil companies have spent around
$5 billion to develop sources of renewable energy, according to Michael
Eckhart, president of the American Council on Renewable Energy, an
industry trade group. This represents only 10 percent of the roughly
$50 billion funneled into the clean-energy sector by venture capital
funds and corporate investors during that period, he said.
"Big Oil does not consider renewable energy to be a mainstream business," Mr. Eckhart said. "It's a side business for them."
Shell, for example, said it spent $1.7 billion since 2004 on
alternative projects. That amount is dwarfed by the $87 billion it
spent over the same period on its oil and gas projects around the
world. This year, the company's overall capital spending is set at $31
billion, most of it for the development of fossil fuels.
Industry executives contend that comparing investments in oil and
gas projects with their research efforts in the renewable field is
misleading. They say that while renewable fuels are needed, they are
still at an early stage of development, and petroleum will remain the
dominant source of energy for decades.
In its long-term forecast, Exxon
says that by 2050, hydrocarbons - including oil, gas, and coal - will
account for 80 percent of the world's energy supplies, about the same
"Renewable energy is very real," David J. O'Reilly, the chief executive of Chevron,
said in a speech in New York last November. "We need it. It will be an
essential part of the future I envision. But it's not realistic to
suppose we can replace conventional energy in a timeframe that some
Chevron has spent about $3.2 billion since 2002 on "renewable and
alternative energy and energy efficiency services," according to
Alexander Yelland, a spokesman. It plans to spend $2.7 billion in the
three years through 2011 on a variety of projects, including a business
that helps improve energy efficiency for companies and government
agencies, he said.
Despite Washington's newfound green enthusiasm, industry executives
argue that replacing any significant part of the fossil fuel business
will take decades, at best. Just to keep up with growth in demand for
conventional sources of energy, producers will need to invest more than
$1 trillion each year from now to 2030, according to the International
"Many of these companies see the world is changing," said Daniel
Yergin, the chairman of Cambridge Energy Research Associates and a
historian of the industry. "But the challenge for a very large company
is to get critical scale. People tend to forget the scale of the energy
The world consumes about 85 million barrels of oil a day. The United
States alone would require six times its arable land - and 75 percent
of the world's cultivated land - to supply its needs with ethanol made
from corn, according to calculations by Vaclav Smil, an energy expert
at the University of Manitoba.
More realistic, and modest, targets are proving tough to reach.
Congress's ethanol mandate, which requires oil companies to use 36
billion gallons of ethanol by 2020, cannot be achieved, experts say,
without major technological advances that are still years away.
To increase supplies, most companies are looking to tar sands in
Canada or converting coal or natural gas into liquid fuels,
technologies that emit far more carbon dioxide than conventional oil
Shell, a major investor in Alberta in Canada, says that traditional
oil supplies will not be enough to meet the growth in the world's
energy needs over the next half-century. In 2007, BP invested in
Canadian tar sands, prompting criticism that it was "recarbonizing"
John M. Deutch, a professor at the Massachusetts Institute of Technology
and a former director of central intelligence, said there was little
point in criticizing oil companies without first establishing federal
rules that set a price on carbon dioxide emissions. Once that happens,
he said, companies will adapt their strategies.
"What role will oil companies play in the future in alternatives to
conventional hydrocarbon? The correct answer is nobody knows," Mr.
Deutch said. "The important thing is for the government to establish a
carbon policy. You can be absolutely confident that oil companies will
pursue that, as will any other companies."
One area where companies are increasingly focused is the development
of liquid fuels from plants. BP said it would soon build a
demonstration plant in Florida for a type of ethanol made from plant
material; Shell has worked with several firms since 2002 to develop
ethanol from nonfood crops. Last year, it signed agreements with six
companies, including one in Brazil, and decided to drop its other
renewable efforts to focus solely on biofuels.
"Biofuels feels closest to our core business," said Darci Sinclair, a company spokeswoman.
Other areas also hold significant promise for the industry, like
technologies to capture carbon dioxide emissions and store them
underground, and energy-efficiency programs, especially in the
transportation sector. Exxon, long the most skeptical of the oil
companies toward alternative energy investments, is working on
long-term programs to improve fuel economy and reduce emissions.
In the end, many analysts say they believe that oil companies are
waiting for a winning technology to emerge. Alan Shaw, the chief
executive of Codexis, a biotechnology company in Silicon Valley that
works with Shell, said oil companies were not blind to the new
political reality but they were also in the business of making a
"Don't lose heart with Big Oil," Mr. Shaw said. "They aren't at a
point where they are ready to invest yet, but they are getting there. I
think in the next 10 years, they will invest hundreds of times more
than they have in the past 10 years."
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