Before he was president of the World Petroleum Council (WPC), one of Pedro Miras’ first jobs was working on energy efficiency at a refinery unit in Tarragona, Spain. In the intervening years such units have been significantly improved to promote chemical recycling and reduce waste and emissions.
“It is amazing to see how traditional refineries have been converted to run along the lines of a circular economy. Efficiency is something the industry has been working on for a long time,” says Miras. “Addressing it is in our DNA.”
Current action on methane emissions by a number of WPC member countries is a result of the same attitude.
“It is one of the key developments in the operations of oil and gas companies at the moment. There is lots of investment going into developing new monitoring and reduction technologies,” he continues.
That innovative spirit is key to tackling all aspects of the energy transition and is the reason Miras believes the oil and gas industry will be a key enabler to the transition, rather than—as some industry opponents claim—its enemy.
“Oil and gas companies are the only companies that are able to deliver energy to all populations around the world,” he says, noting that large swathes of the global population still live in rural communities that are hard to electrify.
“Electricity cannot go everywhere, but we can,” he says. “That makes us key players in the transition.”
At the same time as reaching the 1bn people who still do not have access to energy, oil and gas firms need to determine how they can decarbonise scope three emissions, as well as scope one and two.
“Not everyone is going to have an electric car,” he says. “The industry needs to work out how to provide low-carbon energy to these people as well.”
That work is underway, but it will take years to commercialise and bring down costs.
“We are working hard to develop the production of sustainable fuels using hydrogen and CCUS technologies, as are companies on the demand side such as auto-manufacturers, maritime and aviation. It is amazing to see how fast progress is happening, but inevitably it will take time,” he says.
Energy security
Meanwhile, energy security is becoming an increasingly important pillar of the much-discussed energy trilemma—the balance between energy security, affordability and decarbonisation.
“My opinion is that, before Ukraine and the Covid-19 pandemic, the three pillars were a little bit unbalanced. Everyone thought that prices were not a problem, and there was not much concern about security of supply.”
The current landscape has changed and represents a new challenge for firms.
“Now we are back to facing issues which have always been there, but upon which there is a renewed focus,” Miras says.
Addressing security of supply and high prices in the near term will mean more investment. Globally, the sector has reduced fossil fuel investment in recent years from just over $1,000bn in 2015 to $671bn in 2020, according to data from the IEA.
Many oil and gas firms faced public and government pressure to reduce emissions during this period and also reported increasing difficulties in raising finance for traditional upstream projects.
But that may be starting to change in light of the new priorities, according to Miras.
“Before the war in Ukraine and Covid-19, we saw many funds saying we are not going to finance this sector’s traditional business,” he says. “But in the end, I think they will provide whatever finance companies need to deliver energy. There is currently no other option, because if they do not prices are going to be very high.”
Already investment levels have recovered slightly, to $834bn in 2022, the IEA’s data shows, and further growth is expected this year.
Importance of ESG
However, Miras was keen to emphasise that this recent increased focus on addressing energy security and affordability does not come at the expense of efforts towards decarbonisation.
“We cannot neglect our ESG ambitions. Companies are still very aware of these, and of course regulatory regimes around the world will not allow them to forget,” he insists.
Are those regulatory regimes still structured in the right way to allow companies to balance the demands of the energy trilemma?
“Our opinion at WPC is that it is important to set targets. But nowadays there is some confusion among policymakers. Instead of saying ‘every company has to reach this target by a certain date’, they try to specify technologies. This is a mistake because companies left to their own devices will find the most efficient way to meet the targets.”
This is especially the case in Europe where Repsol, Miras’ former employer, has many of its operations.
“The regulation in Europe can be overly specific. It is much better in the US. Companies just want to be able to use their innovative instincts and technologies to reach the targets that have been set,” he concludes.
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