Oil companies like Shell have unique skills that make them ideally placed to help build the energy world of the future. Yet they seem unable to look beyond their own interests, says Adriaan Kamp, former Shell manager and founder of Oslo-based consultancy Energy For One World. “Like the banks, they can’t change their ways. They are still making too much money with oil and gas.” According to Kamp, the growth strategy of the oil companies is still based exclusively on expanding their oil and gas business – in Shell’s case most of all LNG. “They leave it to others to come up with the real solutions.” Kamp is convinced this strategy is doomed to failure. “The present energy system cannot continue as it is.”
To explain where the oil and gas industry stands in the energy transition debate, Adriaan Kamp tells a little anecdote. “Every year in Oslo there is the Oslo Energy Forum. This is a kind of mini-Davos for top officials from western oil and gas companies. This year the Forum’s Managing Director, Johan Nic Vold, ex-Shell executive, held a speech, which he showed to me. It essentially said: we need the Elon Musks of this world, the Apples and the Googles, to come up with radical solutions. We, oil and gas companies, can’t do it.”
I had asked Kamp for an interview because I wanted to find out from him how oil companies like Shell are viewing their future, knowing that much of their fossil fuel reserves will have to stay in the ground – or may lead to runaway global warming.
“Oil people still live in a bubble. They lead a very good life”
If anyone should be in a position to address this question, it’s Kamp. Trained as a physicist at the Technical University Delft (the same Alma Mater as that of Shell’s current CEO, Ben van Beurden, who is a chemical engineer), Kamp joined Shell in 1987. His first job was to supervise the building of oil and gas installations in Oman. Later he supervised upstream projects and developed new businesses (including unconventional plays) in Norway, Syria and, Scotland. After some years outside of the company, he returned to Shell to work at the head office in The Hague, where he cooperated with Shell’s famous “scenarios” team. However, increasingly uncomfortable with Shell’s strategy, he left the company in 2009 to start his consultancy Energy for One World, which is intended to help develop worldwide leadership to cope with “the global energy challenge”.
Asked about the Shell-view of the world, Kamp tells me the anecdote about the Oslo Energy Forum anecdote, and explains: “The oil companies say: the world needs energy, it needs oil and gas. That’s what we will deliver. It’s not up to us to change that.”
Don’t feel they threatened then, by investors who are taking money out of the fossil fuel sector, and by climate change measures? “There are many inside Shell who have the will to change, professionals who are eager to take on new challenges, who want to align the corporate agenda more with the national agenda. But oil and gas still are a money-making machine. Just like the banks.” Oil people still “live in a bubble”, says Kamp. “They lead a very good life. They operate in a very strange environment: the less they do, the more the price of their product goes up, and the more money they will make. That’s a very perverse incentive.”
Shell did spend considerable time and effort looking at alternative options in the past, Kamp acknowledges. “They were active in power production during the Enron time. They even partnered with Enron on some projects. They were active in advanced biofuels, solar power, offshore wind, nuclear, coal. The whole range of energy technologies has been inside the walls of Shell at one time or another.”
“They made the choice: let’s produce, market and trade LNG. But this is virtually the only strategy they have”
Yet these ventures never came to anything. There were two main reasons for this, says Kamp. “One: Shell is foremost a business, they operate on the shareholder model, so they go for the highest shareholder returns. These are in oil and gas, not in those other options. Two: Shell’s managers, although they are very capable, have a different DNA than which exists in these other business cultures. This is something you have to learn. It was a failure of leadership that they did not manage to do so.”
Kamp also saw that the Shell executives were in the end unable to look beyond their existing capabilities, based on oil and gas. “They were too enthusiastic about shale and not enthusiastic enough about electric cars.”
In the end, says Kamp, Shell’s strategy boiled down to almost a single priority: LNG. “They made the choice: let’s produce, market and trade LNG. Then we can turn gas into a global commodity market, remove it from too much geopolitical emotions. We can untie gas from national markets, so we as a company can play a key role in this new global trading market. They also figured that gas can help solve some problems – it can lead to lower CO2-emissions if you substitute it for coal and is less polluting. But this is virtually the only strategy they have.” (Note that this interview was held before Shell, world market leader in LNG, took over BG, the world’s second largest producer of LNG. Editor)
Although Kamp says he can understand Shell’s strategy up to a point, he does reproach the company (and other oil companies) for how they have positioned themselves in the climate change debate. “They have built up an enormous lobby over the past decades. They know every policymaker who counts. But how have they used their influence? What have they been saying? Can you simply say that coal is worse for the climate than gas? Can you simply say that offshore wind is expensive? These things depend on all sorts of assumptions. But they have waged a very one-sided campaign.”
Kamp is concerned about the course Shell is taking under their new CEO, Ben van Beurden
Kamp says the oil companies propose just two things to fight climate change: CCS (carbon capture and storage) and carbon trading (as for example in the EU Emission Trading Scheme). Both, he says, are essentially delaying tactics. “CCS is not really feasible and carbon trading has all kinds of problems.”
What is more, he does not see any change in the oil companies’ attitude. In fact, Kamp is concerned about the course Shell is taking under their new CEO, Ben van Beurden. “He has said several things that worry me. First he was asked if he minded that universities and churches were disinvesting from Shell. He said no, there are plenty of others who can take their place. That’s very disappointing. With a response like that, he takes the soul out of the company.” Then, says Kamp, “Van Beurden gave a rather disappointing speech a the IP Week Dinner in London on 12 February. He merely reiterated the importance of fossil fuels and failed to develop any kind of solutions that go beyond Shell’s own interest.”
Kamp also points to Shell’s Arctic drilling campaign. “It doesn’t matter whether Shell can do this safely. They probably can. But if a company like Shell is so eager to drill out there, how can we expect others to refrain from doing so? Do we want this, one of the last pristine regions of the world, to be cluttered with drilling rigs? When do we have enough?”
This relates to the deeper reason why the fossil fuel based energy system cannot be sustained, in Kamp’s view. “Sustainability is not only about the climate. Or about pollution. If the world now follows the ‘western’ example and starts building the same energy structures – centralised fossil fuel power plants, chemical plants, refineries, oil-based transport systems – a much larger world population will be more dependent than ever on fuels that are becoming ever scarcer and that will require ever more extreme methods to be produced. This just cannot continue.”
“Wouldn’t it be great if Shell now used their unique expertise to help build the energy system of the future here in North West Europe?”
Kamp sees the solution not merely in the growth of renewables, but in the development of what he calls a new “energy architecture”, or infrastructure, that can support the energy system of the future. For example, in North West Europe, he says, we should be building a new energy infrastructure around large-scale offshore wind and hydropower in combination with small-scale, decentralised energy production and transmission. This would include an infrastructure for electric cars.
A company like Shell, says Kamp, would be ideally suited to play a key role in such a future. “Shell and other large oil companies, like Statoil, have become specialised in carrying out huge projects. They spend 10, 15 years preparing for billion-dollar projects like gas-to-liquids or LNG value chains, and then spend another 10, 15 years in building them. This has become their unique expertise. Wouldn’t it be great if Shell now used this expertise to help build the energy system of the future here in North West Europe?”
If the oil companies do not change the energy system, then, Kamp is convinced, the change will be forced upon them from the outside. “There is a very strong movement toward sustainable energy in the world. And climate change is becoming very much a Pandora’s box. Things will start to jump out of it that will have the ability to change the world in very unpredictable ways. The boards of the oil and gas companies cannot continue to look away from this.”