Oil and Gas Investor Op-ed: $375 a Barrel

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Spoiler: It’s the spot price for biofuel. A forum hosted by Denver-based law firm Davis Graham & Stubbs in November included a panel on the energy transition outlook.

The question posed by Mave Gasaway, a partner: “Net-zero emissions by 2050. Is it possible?”

Jack Collins, president of BPX Energy, the U.S. onshore business of BP Plc, said, “I’m optimistic. I believe in human ingenuity, believe in technology and advancement, and really, truly believe it is a necessity.

“We can all have debates on the climate. ‘Do you believe that the climate is changing?’ and ‘Do you believe that you need to reduce emissions going forward?’”

But the capacity to change the trajectory exists, he said. “We absolutely have the ability in this world, with … the human creativity we all have and exhibit day in, day out, in whatever our professions are.

“I truly believe we can solve this. We will solve this. There needs to be a lot of effort.” There “needs to be a will to solve it going forward.”

But, yes, “100%, we can get there. We must get there.”

I was on the panel and hadn’t brought a filter. Something about making it through 2020: The filter’s been tossed. Or maybe it’s too much Twitter. No matter, I suggested that the oil and gas industry’s personnel themselves will be the leaders of achieving climate goals.

Some industry members’ reticence to participate has been a concern. And word that some members of the renewables industry don’t want to hire oil and gas people has been a concern too.

“The industry is filled from bottom to top, top to bottom, with the best and the brightest. The oil and gas industry knows how to make energy,” I offered.

Blue and green energy industries should recruit from oil and gas—and vice versa. “It would do great harm that not all of the different sectors of energy work together to make this work. It is, in fact, ‘all of the above.’”

Another panelist, Terry Kulesa, co-founder and CEO of IR1 Group, a biofuels developer, said all of the “managers that we hire come from the oil and gas industry.” And that’s not a coincidence, he added.

Rather, “they’re very knowledgeable. They know all the systems, the pumps, the valves, all of it.”

The company’s founders have been involved in development of 10 biofuels plants to date with some 400 million gallons of capacity.

Its job postings result in “a hundred resumes for any job from these engineers” with Exxon Mobil Corp., Shell Oil Co. and others, Kulesa said.

“People want to come over from that side. They see (the transition) happening. And especially the young people coming out of college—they all want to work for ‘the next wave.’ They’re very knowledgeable, very capable, and we would be lost without them.”

In response to an attendee’s question, Collins said what he worries about is, “If we don’t transition, we will completely lose investor confidence in the company going forward.”

Investors want returns, of course. “We believe that we can actually improve our return on capital employed by making these (transition) investments going forward,” he said.

As BP announced its pivot to investing in other forms of energy and in lower-carbon operations and products, the stock price “didn’t ‘go Tesla’ on us or anything,” he noted.

But, over time, BP is proving its tack. “It’s delivering on it.” And, “at the end of the day, that’s what our customers want. It’s what our investors want. That’s what the world needs.”

Kulesa said he gets $375 a barrel for biofuel. So the returns are there. “There is a lot of return right now in that space.”

Collins added that, while BP’s oil and gas production will decline in some areas, it is expected to grow onshore the U.S. “Oil and gas will be a part of the energy mix in the energy transition going forward.”

In how the transition is fulfilled, “the role that oil and gas will play will be critical,” he said. “It won’t happen overnight. There are going to be massive investments across the world—trillions and trillions of dollars to rethink how we deliver energy in a decarbonized way.”

Collins concluded that the energy transition is a massive challenge, “but just to reiterate: I’m optimistic. We got this.”

Gasaway concluded, “Well, with 2- and 4-year-old children, I feel very encouraged by those answers.”