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European Big Oil Opens Schism on Climate With U.S. Rivals

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Article by Tara Patel and Javier Blas published 1 June 2015 by 

The heads of Europe’s largest oil and gas companies joined together for the first time to call for governments to agree on carbon pricing at a United Nations climate summit, opening a schism with their American rivals.

“It’s clear that the subject isn’t viewed in the same way on both sides of the Atlantic,” Total SA Chief Executive Officer Patrick Pouyanne, one of the signatories, said on Monday at a press conference in Paris. “We are working with those who come forward.”

The banding together on climate-change policy by BP Plc, Eni SpA, Royal Dutch Shell Plc, Statoil ASA, Total and BG Group Plc is unprecedented and follows comments by some of their CEOs calling for the industry to be part of the debate on a deal limiting greenhouse gases. It also highlights division within the sector as the top American companies, Exxon Mobil Corp. and Chevron Corp., decided to stay out of the European initiative.

“Climate change is a critical challenge for our world,” the heads of six European energy companies wrote to the top UN official in charge of climate talks. “We need governments across the world to provide us with clear, stable, long-term ambitious policy frameworks.”

Pouyanne pointed to remarks made last week by a U.S. oil executive, who he didn’t name, that illustrated the difference in approach between companies on opposite sides of the Atlantic.

Exxon Mobil CEO Rex Tillerson last week said he doesn’t intend to “fake it” on climate change.

Carbon Tax

The company said on Wednesday that it supports a carbon tax over a cap-and-trade system. Exxon is “actively engaged” with the European companies through an organization called International Petroleum Industry Environmental Conservation Association, or Ipieca, representing more than 60 percent of oil and gas production, spokesman Scott Silvestri said.

Chevron CEO John Watson said the company wouldn’t join the European initiative. “We think we can make our statements, and our statements speak for themselves,” he told shareholders last week.

The company said on Monday that it’s been engaged on the topic of climate change and, like Exxon, pointed to its membership in Ipieca.

“We believe that taking prudent, practical and cost effective action to address climate change risks is the right thing to do,” Chevron said in a statement.

Nonetheless, the split resembles another industry schism in 1997-98 when BP and Shell broke ranks with their American oil counterparts leaving the Global Climate Coalition, at that point the U.S. industry’s foremost lobbying group in fighting efforts to limit the use of fossil fuels.

Paris Conference

The letter to Christiana Figueres, the executive secretary of the UN climate body, and Laurent Fabius, the French foreign minister, promotes natural gas as the least-polluting of fossil fuels, in opposition to coal, and coincides with the start of the World Gas Conference in Paris this week.

“We write to highlight the major role natural gas can play in addressing climate change,” the CEOs said in a separate letter published in the Financial Times.

The main lobby group for the coal industry responded immediately, saying that for “many countries, the reality is that the only way they can meet their growing energy needs is through affordable, readily available coal.”

“Cleaner coal technologies” were vital to reduce carbon emissions, the World Coal Association said in its statement.

The push by Europe’s oil companies comes as efforts to reduce fossil-fuel investments and spur renewables such as solar have gathered pace in the past two years, with oil companies sitting largely outside the debate. The European firms are more sensitive to environmental issues because governments in the region are leading the way on climate and voters are demanding action.

Consumer Products

Carbon pricing was the main theme of a meeting last month – – also in Paris — of business leaders on climate change during which CEOs from the banking, insurance and consumer products industries as well as energy called for a cost to be placed on carbon emissions as an incentive for companies.

Negotiators began 11 days of meetings in Bonn Monday to work out differences ahead of talks in Paris in December. The goal of envoys from more than 190 nations is a deal that for the first time would require developed and developing countries to take action.

Despite the public split between U.S. and European energy groups, emissions data released through the Carbon Disclosure Project show little difference between both sides. All have reduced pollution “slightly” since 2011, with BP in the lead mainly because of asset sales needed to pay $40 billion in costs associated with the Gulf of Mexico disaster in 2010.

Divestment Campaigns

The letter could provide the European oil groups with alternative arguments to counter the divestment campaign, which has persuaded institutions such as the Rockefeller Brothers Fund and Stanford University to scrap fossil fuel investments. French insurer Axa SA and Norway’s sovereign wealth fund, two of the world’s most influential institutional investors, have also announced they will reduce their investments in coal mining and coal power plants.

The coming together of the European companies was borne out of an encounter by BP, Shell, Statoil and Total executives in Oslo, Pouyanne said Monday.

“We realized that we were fundamentally in agreement,” he said. “Because we make up a significant part of the oil major market, it would be worth it that European oil companies make a commitment without necessarily having an American oil company on board.”

Discussions with U.S. oil companies have taken place and “we hope that one of them will join us soon.”

A predecessor also without American participation called the Oil and Gas Climate Initiative was started in January 2014 and includes Total, BG and Eni as well as Saudi Aramco, Petroleos Mexicanos and China Petroleum & Chemical Corp. It focuses on gas flaring, methane emissions, carbon capture and storage.


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