The Scoop
US President-elect Donald Trump’s aspiration to unleash a lot more oil and gas drilling domestically faces a fundamental obstacle: The global market is already well-supplied, the CEO of ExxonMobil told Semafor at the opening of COP29.
Darren Woods was in Baku on Tuesday for just one day of the global climate summit, ready to convince world leaders and thousands of highly skeptical activists that companies like Exxon can and should play a more proactive role in solving the climate crisis. But that doesn’t mean transitioning away from fossil fuels, the goal that was adopted by negotiators at COP28 last year, Woods said. Instead, Exxon’s approach is to engineer technologies that allow fossil fuels to be burned with lower carbon emissions, which in Woods’ view will serve the company’s bottom line as much as the global climate. Government policies designed to force a rapid phaseout of oil and gas consumption are the wrong strategy, he said: “A lot of the policies that have been pursued to date, which force you to choose between affordable energy and reduced emissions, aren’t working.”
But Woods agreed with recent comments from Patrick Pouyanné, CEO of TotalEnergies, that the Trump administration shouldn’t move to scrap the Biden administration’s regulation to curb methane emissions from oil and gas operations. And he said that while ongoing capital spending is needed to maintain US oil production at its current record-high levels, the further increase in production sought by Trump probably isn’t in the cards, for now.
“I don’t think today that production in the US is constrained,” he said. “So I don’t know that there’s an opportunity to unleash a lot of production in the near term, because most operators in the US are [already] optimizing their production today.”
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Tim’s view
The leader of the world’s largest non-state-owned oil company might seem like an incongruous fit for a climate summit. But I didn’t notice him being hounded by activists, and he’s likely to find a receptive audience among the summit’s hosts in gas-rich Azerbaijan for his effort to refocus the public dialogue on emissions, rather than fossil fuel consumption. It’s too early to judge how well the summit will perform on its core objective to raise more climate finance, but it’s fair to say Trump’s reelection — the main topic of every conversation I’ve had here so far — has everyone tempering expectations for how quickly the energy transition will progress.
Oil companies, with big balance sheets and deep engineering expertise, should play a bigger role in global climate talks, Woods said, to push back “on the singular idea of swapping out an existing, very large, very efficient energy system with a brand new one that, frankly, doesn’t address all the existing needs. I think we’re missing the opportunity to transition the existing system to lower carbon, versus just walking away from it.”
But he warned that the chaotic nature of environmental regulation in the US over the last decade, with each successive administration throwing out most of their predecessor’s agenda, has made it challenging to make decisions about how to invest in the energy transition. In a separate interview with The Wall Street Journal, Woods added that the US shouldn’t pull out of the Paris Agreement, another early priority for Trump.
“The polarization and political back-and-forth that we see in [the US] is not good for the country, not good for society. It’s frankly not good for business,” he told Semafor. “What we need is more thoughtful, consistent regulation.”
In the immediate term, the regulation at the top of his mind isn’t the Biden administration’s emissions restrictions, but the still-unfinished rules for Inflation Reduction Act tax credits for hydrogen production, which Woods said he is pressing the administration finish as soon as possible, even though there’s a risk that Trump could change them. And although he thinks the oil market is currently well-supplied, he said Trump could consider opening more federal land for drilling, to keep production high into the future.
In its latest emissions report, Exxon said it is on track to decarbonize its Permian Basin operations by 2030, and the rest of its global operations by 2050. And in the meantime, Woods said the company is working on alternative uses for hydrocarbons, including for applications in steel and battery manufacturing, which could maintain demand for oil even if less is required for traditional fuels. But Woods added that Exxon still has no intention to set a target for reducing its scope 3 emissions.
Room for Disagreement
The focus on reducing emissions is essentially a high-stakes bet on technologies that have not proven effective, Nils Bartsch, head of oil and gas research at the German advocacy group Urgewald, told Semafor. “Our data shows no signs that the oil and gas industry is transitioning away from its climate-destructive business model. A rapid, managed decline of fossil fuel production is our only chance to keep the Paris goal within reach.”
Notable
- A Dutch appeals court on Tuesday threw out a landmark climate lawsuit against Shell, handing a major victory to the oil company that could hamper future litigation aiming to force top emitters to decarbonize.