Better to have a seat at the global table, companies say
Oil demand to grow even with agreement in place, Woods says
President Donald Trump faces some unlikely opposition to the idea of pulling the U.S. out of the 2015 Paris climate accord: Exxon Mobil Corp. and ConocoPhillips, two of the world’s biggest oil producers.
Both companies reiterated their support Wednesday for the global agreement to cut greenhouse gas pollution amid reports that Trump planned to ditch a pact he says hurts the U.S. economy. Their argument: The U.S. is better off with a seat at the table so it can influence global efforts to curb emissions that are largely produced by the fossil fuels they profit from.
Exxon Chief Executive Officer Darren Woods took it a step further during the company’s annual investor meeting in Dallas, saying that oil demand will continue to grow in the coming decades, even with the Paris agreement in place.
“Energy needs are a function of population and living standards,” Woods said in his first annual meeting since becoming CEO on Jan. 1. “When it comes to policy, the goal should be to reduce emissions at the lowest cost to society.”
Woods has been a staunch advocate for keeping the U.S. in the Paris group, as was his predecessor Rex Tillerson, who is now Trump’s secretary of state. In his first blog post after becoming CEO, Woods advocated low-emission fuels, carbon capture and biofuels as tools for meeting the goals of the Paris agreement.
On Wednesday, Woods said he remains committed to the Paris pact’s goals and methods.
Population growth and a desire for higher living standards will increase usage of petroleum-derived fuels, especially for transportation, because there are few widely available alternatives, he said. There’s a huge untapped energy market among the 1 billion people who currently have no access to electricity and the 3 billion who don’t use modern cooking fuels, Woods said.
ConocoPhillips, the world’s largest independent oil and gas producer, also expressed support for the climate agreement on Wednesday. “It gives the U.S. the ability to participate in future climate discussions to safeguard its economic and environmental best interests," spokesman Daren Beaudo said in an email.
BP Plc CEO Bob Dudley, another oil executive who supports the accord, said that even if the U.S. quits, the nation should find new policies to support the inevitable transition to a low-carbon economy.
“We’ve got to transition the world to lower-carbon forms of energy,” Dudley said in an interview on Bloomberg television in St. Petersburg, Russia. If Trump quits the accord “we need to be really clear -- rather than just walking away from it -- what you put in place in the United States.”
Utility owners including Consolidated Edison Inc. and the energy unit of Warren Buffett’s Berkshire Hathaway Inc. said Wednesday that they would continue investing in gas, wind and solar power as they seek to cut emissions.
“Energy industry economics and investments have been moving for many years toward more renewables, smart technology, energy efficiency, and we expect that direction to continue," said Michael Clendenin, a spokesman for New York-based ConEd.
While a U.S. withdrawal from the Paris accord would be “a great disappointment,” the shift toward renewable energy is inexorable, Gerard Mestrallet, chairman of French utility Engie SA, said in an interview with Bloomberg Television in St. Petersburg Thursday. Most countries will stick with the accord, and in the U.S., corporations that regard reducing emissions as a duty will adhere to its principles, he said.
Still, pulling out of the Paris agreement could have a chilling effect, said Warren Patterson, a commodity strategist with ING Bank NV in Amsterdam.
“It’s not good news for the gas industry," Patterson said in a telephone interview. “We probably see it slowing down the shift toward power generation from natural gas. That’s the main takeaway. It is negative news for natural gas producers."
The falling costs of natural gas and renewables mean that’s likely just “a hiccup in the move toward a cleaner energy matrix," he said. A future president could undo Trump’s moves to support fossil fuels, he said.
Solar-power stocks lost ground on news that Trump might withdraw. That was short-sighted, according to Jeff Eckel, CEO at Hannon Armstrong Sustainable Infrastructure Capital, Inc., an Annapolis, Maryland, company that finances energy efficiency and renewable-energy projects.
The move toward renewables “is an irreversible trend that’s gaining momentum," he said.
Meanwhile, Exxon investors, in a split with the company, urged the explorer to publish a detailed analysis on how carbon curbs could affect the value of the explorer’s oil fields, refineries and pipelines.
More than 60 percent of voters approved the non-binding resolution backed by shareholders including the California Public Employees’ Retirement System and the Church of England investment fund.
The vote, coming during the annual investor meeting, was “an unprecedented victory for investors in the fight to ensure a smooth transition to a low-carbon economy,” New York State Comptroller Thomas P. DiNapoli said in a statement. “Climate change is one of the greatest long-term risks we face in our portfolio and has direct impact on the core business of Exxon Mobil.”
Woods said his forecast on future oil growth assumes governments adhere to the strictures of the Paris pact, which calls for limiting emissions to prevent global temperatures from exceeding pre-industrial levels by 2 degrees Celsius (3.6 degrees Fahrenheit). He declined to comment on what a U.S. exit would mean for the agreement.
In May 2016, the proposal received a 38 percent “yes” vote after the company said it already disclosed ample data about emissions and risk management. As a result of this year’s 62 percent “yes” vote, the board will reconsider its opposition.
At rival oil explorer Chevron Corp., activists failed to carry the day. About 73 percent of shareholders rejected a proposal at the company’s annual meeting on Wednesday that urged the second-largest U.S. oil producer to look into shifting its focus to renewables and away from fossil fuels.
— With assistance by Brian Eckhouse, Naureen S Malik, Jim Polson, Erik Schatzker, Francois De Beaupuy, and Jess Shankleman