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Oil chiefs differ on strategy for global warming

Financial Times: Oil chiefs differ on strategy for global warming

“I’m convinced that [climate change] will have a huge impact on our industry,” says Jeroen van der Veer, Shell’s Dutch chief executive.”

Thursday 7 July 2005

By Thomas Catan

Published: July 7 2005

Perhaps more than any other industry, oil companies are having to get to grips with the issue of climate change – one of the top items at the Group of Eight summit. They are also more divided than other industries, with Shell appointing a “Mr or Mrs CO2” and ExxonMobil dismissing such initiatives as public relations.

ExxonMobil, the world’s largest oil company, has drawn the ire of environmental campaigners by opposing the Kyoto agreement to curb carbon dioxide emissions and for investing almost nothing in renewable energy.

Even so, the company says it takes the issue of climate change “very seriously”.

In an effort to persuade the public, ExxonMobil is running an advertising campaign highlighting its efforts to reduce greenhouse gas emission from its own plants and refineries.

It is also working with vehicle manufacturers such as Toyota to improve the efficiency of car engines. And it has pledged $100m (€77m, £55.5m) over a decade to a Stanford University research programme to limit carbon emissions.

Royal Dutch/Shell, the third largest publicly held oil company, has taken the opposite tack. It has identified climate change as a key business opportunity and says renewable sources, into which it has invested $1.5bn, could provide a third of the world’s energy by 2050.

“I’m convinced that [climate change] will have a huge impact on our industry,” says Jeroen van der Veer, Shell’s Dutch chief executive. “You still feel that a lot of people see it . . . as a cost. Whereas I’m of the school that thinks ‘my goodness, if we find better solutions to CO2 than our competitors . . . that gives me a better seat at the table.”

ExxonMobil thinks such sentiments are little more than public relations. Lee Raymond, its chairman and chief executive, told the Wall Street Journal last month: “We’re not playing the issue [of climate change]. I’m not sure about the others. I get this question a lot of times: ‘Why don’t you just go spend $50m on solar cells? Charge it off to the public-affairs budget and just say it’s like another dry hole?’ The answer is: That’s not the way we do things.”

Told that ExxonMobil disagreed with its bullish view on renewables, Mr van der Veer retorted: “That’s their problem then.”

BP, the second largest oil company, has staked out a carefully calibrated position that is poised somewhere between that of the other two companies. Lord John Browne, BP chief executive, says that renewables will play an important part in the future energy mix but he urges people to be cautious in their expectations.

He agrees with ExxonMobil that the science for climate change is not incontrovertible, but says this does not preclude the need for precautionary action.

BP has invested $500m in renewable energy sources in the past five years. It is also involved in a trial “carbon sequestration” programme in Algeria, under which carbon dioxide from gas production is reinjected into a reservoir under the earth.

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