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The Guardian: Promises of green energy fuel expectations

Bad publicity seems to be an occupational hazard of the oil world. So what are companies doing to ensure that the publicity is unwarranted?

Terry Macalister
Monday November 6, 2006

Big oil companies have been working hard to shine their green credentials but moan that they are rarely given appropriate credit for the positive steps they do take.

As long as they make record profits from their oil and gas operations while continuing to invest relatively small sums of cash in renewable projects, they are unlikely to see much change.

And while campaigning environmentalists do recognise BP and Shell as “progressives” compared to industry rivals such as ExxonMobil, they remain sceptical over whether the whole thing extends any deeper than marketing.

Craig Bennett from Friends of the Earth puts it bluntly: “You will see a lot of advertising from these companies highlighting their green credentials but this is all about trying to boost the morale of their staff and ultimately it’s superficial.”

In fact, the decision by John Browne, BP’s chief executive, to use the tagline “beyond petroleum” while increasing oil output and overall greenhouse gas volumes has left him facing a deeper level of cynicism.

Similarly, the harder that Shell works at its environmental assessment studies, at new gas projects such as Sakhalin in Russia, the worse the fall – and criticism – when things go wrong.

And no matter how hard ExxonMobil argues that its position on climate change has been misrepresented, few environmentalists are willing to give the Texan giant the benefit of the doubt.

Bad publicity seems to have a habit of following these oil majors around. We currently have Shell’s aspirations to be a better environmental citizen being undermined by a bruising experience in eastern Russia while BP is under fire over its record in Alaska.

Their problems are compounded by earning record profits and yet the bulk of this bounty has been handed back to investors through the buying back of shares or through issuing higher and higher dividends.

Capital expenditure has also been concentrated on hydrocarbons but that should not completely overshadow the fact that both BP and Shell have been putting more emphasis on, and more money into, renewables.

At the end of last year BP took its most significant step establishing a BP Alternative Energy division with promises that it would spend $8bn over 10 years on renewable projects. Small beer, some might argue, given BP spends more than that amount on oil and gas schemes annually, but not to be sneezed at, considering the company believes it can help reduce forecast greenhouse gas emissions by 24m tonnes a year in 2015. That is the equivalent of making a city as big as Berlin emissions-free, it boasts.

Equally, BP is promising to build a world-class wind business and is also ploughing money into hydrogen, which could become the clean fuel of tomorrow. The group is engaged in two groundbreaking schemes to generate power from hydrogen: one at Peterhead in Scotland, the other at Carson in California.

The new alternative energy business also has symbolic importance. The company likes to say it has been in solar energy for 30 years but it has all been relatively low-key stuff until last year when revenues leaped by 30% to nearly $500m.

Lord Browne will say that he was one of the first oilmen to take global warming seriously. He did pull BP out of the Global Climate Coalition, the US body made up of oil and car companies that campaigned against initiatives such as the Kyoto Treaty back in 1997.

But BP, like other oil companies, ultimately believes its role is to provide the world with energy from whatever source is needed and argues that oil and gas will remain dominant for years to come.

It therefore approaches the issue of sustainability in various ways – many of them incompatible with the kind of interpretation that Friends of the Earth or Greenpeace would consider acceptable.

Lord Browne insists he wants to provide energy “to fuel human progress and economic growth. It also means satisfying the need for a sustainable environment.” But then he also says that BP has invested more than $50bn since the turn of the century – mainly in traditional hydrocarbons. “That will help to provide sustainable supplies of oil and gas for decades to come.”

Shell, too, talks about its commitment to “sustainable development” in its general business principles, which were revised and updated in 2005. The Anglo-Dutch group’s version of sustainability is “balancing short- and long-term interests and integrating economic, environmental and social considerations into business decision-making.”

Shell still has 47 traditional oil refineries and a network of 45,000 petrol stations but it, too, has a diversified renewable portfolio, which stretches from hydrogen and biofuels to solar and wind. In fact Shell is at the cutting edge of some of the most dramatic schemes with the world’s first hydrogen filling station – in Iceland – and the world’s biggest offshore wind farm planned off the coast of Kent.

Equally, it is looking at quirky one-off schemes such as using pure C02 for growing fruit and vegetables. This not only cuts 325,000 tonnes of greenhouse gases from the Pernis refinery but also provides cheap – and productive – fuel for growers.

Shell, with Norwegian state oil company Statoil, is also working to develop the world’s largest offshore project to store carbon. The C02 from a new gas-fired station would be stored permanently but also used to push out higher quantities of oil and gas from two North Sea fields.

But while these schemes progress and Shell highlights its new-found sensitivity to the environment, it still marches into new regions of valuable biodiversity such as the Beaufort Sea in Alaska, or Sakhalin. And while it makes far more effort than it would have in the past to accommodate both “green” and social concerns, it can still find itself at the centre of a massive row as it has at Sakhalin in Russia. Having changed the direction of pipelines at great cost and monitored the breeding grounds of the Pacific Grey Whale, it finds itself still under attack from NGOs – and more recently the Kremlin – for alleged environmental degradation.

Similarly, a gas pipeline in Ireland – from the Corrib field – has put it on the receiving end of huge community anger and protests. Shell is pleased that its total greenhouse gas emissions fell last year but admits this was partly because oil output dropped – something it tried to prevent – and because it reduced flaring at a major field in Nigeria. The company has continually promised to bring an end to all this wasteful and environmentally damaging practice only to set new targets into the future, the latest being an end to “continuous” flaring by 2009.

Despite this, the company boasts that it scored highest for “environmental responsibility” for the fourth year in a row as measured by the 2005 reputation tracker survey. But this was a Mori poll that Shell itself commissioned and it is clear that the man and woman in the street remain wary, if not downright sceptical, of big business and particularly big oil.

The only certainty oil companies face is that the standards expected of them will rise as public awareness increases about the environmental fragility of the planet.

· Terry Macalister is industrial correspondent of the Guardian

http://society.guardian.co.uk/givinglist/story/0,,1938749,00.html

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