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Oil Industry Takes Aim at Coal, Pushes Gas Ahead of Climate-Change Talks

Europe’s largest oil companies on Tuesday came out forcefully against coal, taking aim at a competing fossil fuel as they push cleaner-burning natural gas ahead of climate-change talks.

Executives from Royal Dutch Shell PLC, BP PLC, Total SA and others told industry officials at a conference that their increased production of gas could help reduce carbon emissions and lessen the world’s reliance on coal for heating homes and creating electricity. Coal, they said, is a pollutant that sets back environmental efforts.

“Together with renewable energies it is important to promote the use of gas to replace coal,” Total Chief Executive Patrick Pouyanné said. “It would contribute at a low cost to meet carbon-emissions targets.”

The message was delivered at the World Gas Conference in Paris six months before United Nations climate-change talks that could result in an agreement to curb carbon emissions and limit global warning.

Shell, BP and other big European oil companies sent a joint letter to the U.N. this week calling for measures to push up the cost of burning coal, which remains fairly cheap. The companies suggest governments could either tax carbon emissions directly or reduce the supply of carbon-emission credits, required to offset emissions, to make those credits pricier on the secondary market.

The lobbying effort comes as gas grows into a bigger revenue source for the world’s top oil companies.

For instance Shell now produces more gas than crude oil and the Anglo-Dutch company is set to solidify its position on top of the liquefied-natural-gas market with its $70 billion deal to buy U.K. gas company BG Group PLC, which is expected to close next year. Approximately half of BP’s production is natural gas and this could increase to 60% by the end of the decade, according to CEO Bob Dudley.

The coal industry has defended the fossil fuel’s role in the energy mix, with backers noting that natural gas also emits greenhouse gases and that advanced technologies can sharply reduce carbon emissions from coal-fired power plants.

“It’s flawed to think that you’ll reach a solution to climate change without talking about low-emission technology for coal,” Mick Buffier, chairman of the World Coal Association and an executive at Glencore PLC’s coal unit, said in an interview in London on Tuesday. Mr. Buffier said new technology for coal-fired power plants can reduce carbon emissions by more than 30%.

He said China and India, which consume most of the world’s coal, will continue to rely on it for power generation for decades. “The reality is that coal will continue to be used, particularly in developing countries,” he said. He recommends that governments and development banks help fund low-emission technology for coal-fired power plants and the installation of the plants in developing countries.

Long the world’s dominant source of energy, coal will likely play a role for the foreseeable future. According to BP’s World Energy Outlook, coal and gas are forecast in 2035 to each provide roughly the same amount of the world’s energy—just over 25%. Renewable-energy sources will increase but still be less than 10% by 2035, according to BP’s annual tome of energy-industry forecasts.

Natural gas is still a fossil fuel, and burning it produces greenhouse gases blamed for climate change—though much less of it, according to the U.S. Environmental Protection Agency.

The attack on coal comes as oil companies are stepping up their involvement in the climate-change debate before the U.N. summit later this year. The international gathering is intended to seal a deal that would ensure man-made global warming is limited to two degrees Celsius above preindustrial levels, but governments remain far apart on how to achieve this.

Environmental groups increasingly question whether all the resources that have been discovered can be burned if the world is to meet its climate-change goals. In response, the oil industry has begun acknowledging the issues presented by climate change, while also saying investment in fossil fuels must be made to meet the world’s growing energy needs.

Shell Chief Executive Ben van Beurden is pushing for the industry to speak out clearly and with a common voice on the measures it believes are necessary to encourage a shift to lower-carbon energy sources. The coalition of European energy companies on carbon pricing is one aspect. Mr. van Beurden also wants a broader coalition that includes utilities, academics, technology companies and others, acknowledging that the oil industry has a credibility issue.

“We have quite often retreated from the debate believing that whatever we say, there’s only going to be a reputational downside,” Mr. van Beurden said in an interview. “I think with the benefit of hindsight that has been wrong, because as a result the whole societal debate has not moved in the right direction and meaningful policy action has been delayed.”

However, not everyone in the oil industry has embraced this new stance. European oil executives said that U.S. oil companies invited to join their collective action have so far refused.

Speaking at the Paris conference, the heads of both Exxon Mobil Corp. and Chevron Corp. stressed the role natural gas will play in the energy mix in the coming years, but focused more on the need for continued investment amid mounting global demand.

For instance, Exxon Chief Executive Rex Tillerson called on Europe to be more open to hydraulic fracturing. France has a ban on fracking, despite potentially large shale reserves, while Germany has a moratorium.

source: http://www.wsj.com