Big Oil reluctant pg 2

Oil Companies Loath to Follow Obama’s Green Lead

Published: April 7, 2009
(Page 2 of 2)

Despite Washington’s newfound green enthusiasm, industry executives argue that replacing any significant part of the fossil fuel business will take decades, at best. Just to keep up with growth in demand for conventional sources of energy, producers will need to invest more than $1 trillion each year from now to 2030, according to the International Energy Agency.

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Go to Blog » “Many of these companies see the world is changing,” said Daniel Yergin, the chairman of Cambridge Energy Research Associates and a historian of the industry. “But the challenge for a very large company is to get critical scale. People tend to forget the scale of the energy business.”

The world consumes about 85 million barrels of oil a day. The United States alone would require six times its arable land — and 75 percent of the world’s cultivated land — to supply its needs with ethanol made from corn, according to calculations by Vaclav Smil, an energy expert at the University of Manitoba.

More realistic, and modest, targets are proving tough to reach. Congress’s ethanol mandate, which requires oil companies to use 36 billion gallons of ethanol by 2020, cannot be achieved, experts say, without major technological advances that are still years away.

To increase supplies, most companies are looking to tar sands in Canada or converting coal or natural gas into liquid fuels, technologies that emit far more carbon dioxide than conventional oil does.

Shell, a major investor in Alberta in Canada, says that traditional oil supplies will not be enough to meet the growth in the world’s energy needs over the next half-century. In 2007, BP invested in Canadian tar sands, prompting criticism that it was “recarbonizing” itself.

John M. Deutch, a professor at the Massachusetts Institute of Technology and a former director of central intelligence, said there was little point in criticizing oil companies without first establishing federal rules that set a price on carbon dioxide emissions. Once that happens, he said, companies will adapt their strategies.

“What role will oil companies play in the future in alternatives to conventional hydrocarbon? The correct answer is nobody knows,” Mr. Deutch said. “The important thing is for the government to establish a carbon policy. You can be absolutely confident that oil companies will pursue that, as will any other companies.”

One area where companies are increasingly focused is the development of liquid fuels from plants. BP said it would soon build a demonstration plant in Florida for a type of ethanol made from plant material; Shell has worked with several firms since 2002 to develop ethanol from nonfood crops. Last year, it signed agreements with six companies, including one in Brazil, and decided to drop its other renewable efforts to focus solely on biofuels.

“Biofuels feels closest to our core business,” said Darci Sinclair, a company spokeswoman.

Other areas also hold significant promise for the industry, like technologies to capture carbon dioxide emissions and store them underground, and energy-efficiency programs, especially in the transportation sector. Exxon, long the most skeptical of the oil companies toward alternative energy investments, is working on long-term programs to improve fuel economy and reduce emissions.

In the end, many analysts say they believe that oil companies are waiting for a winning technology to emerge. Alan Shaw, the chief executive of Codexis, a biotechnology company in Silicon Valley that works with Shell, said oil companies were not blind to the new political reality but they were also in the business of making a profit.

“Don’t lose heart with Big Oil,” Mr. Shaw said. “They aren’t at a point where they are ready to invest yet, but they are getting there. I think in the next 10 years, they will invest hundreds of times more than they have in the past 10 years.”