Natural gas and oil are expected to be central to the supermajors’ business strategy for decades to come, even as their investments in alternative energy escalate.

“Despite the attraction of renewables, the world can’t run on them alone and won’t be able to for some time,” BP plc Group CEO Bob Dudley said at the Oil & Money conference in London.

Dudley joined a roster of energy intelligentsia at the annual conference to discuss the transition in the global oil and gas markets.

“We’ve learned a lot of lessons over the years,” he said. “Our successes, and frankly more often our mistakes, have informed and shaped BP’s broader corporate strategy. Today we are focused on our dual mission of delivering the energy that the world needs while advancing the low carbon world that we all want.”

However, BP now is pursuing both in a different way than it once did.

Twenty years ago then-CEO John Browne, in a speech at Stanford University, acknowledged the threat of climate change and he committed BP to “real and meaningful action,” Dudley noted. “It was ground-breaking at the time, and it wasn’t just words. We put our money where our mouth was. We set a target to bring our own emissions down by 10% by 2010,” and the company hit the target nine years early.

BP also rolled out an alternative energy business and made several big investments, that among other things led to it becoming one of the largest wind farm operators in the United States. It also poured research money into solar, hydrogen, carbon capture/storage and biofuels.

The commitment was to make a difference -- and make a profit. BP anticipated governments would adopt policies to make low carbon energy more competitive. But that didn’t happen, Dudley noted.

“Then came the financial crash in 2007/2008 and a big change of focus for the world, from green energy to cheap energy. But we stuck with it. Although many of our original investments didn’t pan out, a couple did, and we continue to invest in them.”

Today, BP is considered the biggest renewables operator among the supermajors, including holdings in a U.S. wind farm portfolio and biofuels in Brazil.

“We continue to invest in those businesses and they’re profitable, but it’s fair to say they don’t as yet make a material difference to the bottom line. We’re making smarter, and in many cases, smaller bets, and making more of them across a wider range of technologies and business models.”

Two decades after Browne’s speech, said Dudley, the world again is paying attention to the climate challenge, as evidenced by the Paris agreement, reached by nearly 200 countries in late 2015.

“At the same time, we are just as committed to our traditional oil and gas business,” Dudley said. “Despite the attraction of renewables, the world can’t run on them alone at the moment, and won’t for some time. Of all the energy used by the world right now, 3% comes from renewables. That might go up anywhere between 10% and 30% or more in two decades’ time, depending on the speed of the transition.”

Even if it grows at the slowest predicted rate, renewables will penetrate the energy system “faster than any fuel in human history,” he said. That’s remarkable. So, renewables are clearly coming of age.”
Still, even with renewables growing on the aggressive forecast, the world likely will be looking elsewhere for almost two-thirds of its energy needs for the next 20 years, said the BP chief.

“Natural gas is another big lever for lowering greenhouse gas emissions -- provided that methane is controlled,” he said. “You only have to look at the situation in the U.S. where greenhouse gas emissions are back down to where they were in the 1990’s.

“As you well know, that’s largely because the shale revolution has produced abundant, cheaper gas, which has been displacing coal in the American energy mix.”

BP has been making a strategic shift too, as six of its seven major upstream projects coming onstream this year are natural gas-weighted. Another eight gas projects are planned by 2020.

Society’s goal, he said, is to limit the Earth’s warming to below 2C. “This shouldn’t be about a race to renewables alone; it’s about a race to lower greenhouse gas emissions. That’s a big lesson we’ve learned over the last 20 years.”

Total SA CEO Patrick Pouyanne, also speaking at the conference, also cited the need to build more alternative energy projects while advancing oil and gas efficiencies.

“Today we are considered as an industry of the past by some people, but it’s not an industry of the past at all,” Pouyanne said. “Many wish for a quick revolutionary role reversal between the oil and gas industry and renewables, but an ideological approach could bring great economic and social damage.”

Statoil ASA CEO Eldar Saetre also predicted in an interview at the conference that fossil fuel consumption would decline, but ever so slowly. Statoil recently began operating with partner Masdar the Hywind Scotland project, the world's first floating wind farm. The 30 MW wind farm, operated by Statoil, will provide electricity for about 20,000 households in Scotland.

However, even with the breakthrough project, oil and gas, Saetre said, “will definitely be around for a long time.”