Big Oil hopes to use its experience with fossil fuels to develop profitable large-scale clean-energy ventures. For BP, one of the biggest international oil firms, this is a strategic plank in the company's plan for maintaining its share of an evolving global energy market. "We face the conundrum that if we want to stay at the size we are today, we need to shift into other forms of energy over time," says Katrina Landis, the chief executive of BP Alternative Energy, the company's low-carbon energy division, who will be taking part in a "challenges and solutions" plenary forum at the summit tomorrow afternoon.
Five years ago, BP took a careful look at the alternative energy sector to determine where it had the greatest chance of establishing successful large-scale businesses. It quickly found three with fairly obvious links to its existing oil and gas operations: biofuels, hydrogen power and carbon capture and storage (CCS). For onshore wind and solar power, two other businesses the company decided to pursue, the synergies are more tenuous. In both those sectors, however, a company such as BP, already experienced at developing very large projects, might have a significant competitive advantage. In addition, says Ms Landis, wind and solar power have an "affinity" with natural gas, as neither can produce an uninterrupted flow of electricity on its own. Using gas as a back-up energy source can often make sense, particularly for a company that produces the fuel.
For oil companies in general, says Ms Landis, getting into the biofuels business is a "sensible" move, not least because oil firms already have substantial expertise in and physical assets for processing, transporting and marketing liquid fuels. Not every Big Oil executive has always thought that way. Rex Tillerson, the chief executive of ExxonMobil, once famously resisted shareholder suggestions that the company should invest in biofuels, declaring that he was no expert in agriculture. But the world's largest publicly traded integrated oil and gas firm capitulated last July, when it launched a US$600 million (Dh2.2bn) joint venture with the biotechnology enterprise Synthetic Genomics to develop biofuels from algae. BP also has a small experimental algal biofuels programme. It is also exploring cost-effective ways to produce biodiesel from cellulosic plant sources, including waste from agriculture, forest industries and even municipal rubbish.
The company's biggest biofuel venture, however, is in Brazil's booming bioethanol sector, where it grows sugar cane on land that once supported a sparse cattle herd. Like much else in the brave new world of future energy, biofuels is a complex subject and not without its complications - and critics. BP, points out Ms Landis, does not cut down trees to plant crops: "We focus on feedstocks that minimise impacts on food supplies and lead to material reductions in greenhouse gases."
Nutritionists and health-conscious consumers might be relieved to learn that sugar, at least as refined from the sap of a tropical grass, does not conform to BP's definition of "food". Staple food crops such as maize and wheat do. The bioethanol that BP produces in Brazil is cost-competitive with petrol at a crude oil price of $60 (Dh220) per barrel and contributes 80 per cent less than petrol to greenhouse gas emissions, the company estimates. BP does, however, produce biofuel from wheat at a plant at Hull in England, where it is in a joint venture with the US chemicals firm Dupont. That is a one-off project, says Ms Landis, aimed at improving the technology for producing biobutanol, a new-generation biofuel that performs better than its molecular cousin ethanol when blended with petrol for transportation.
BP's final two alternative energy businesses, hydrogen power and carbon capture and storage, respectively draw on BP's extensive expertise in gas processing and in managing the complex dynamics of underground fluids. Together, these could make a substantial contribution to reducing carbon emissions from thermal power stations and installations such as oil refineries. Ms Landis believes that all these approaches are necessary if emissions are to be capped below levels that would cause catastrophic environmental damage. "Some of the larger scale technology, including CCS and nuclear, have to be deployed. It's just not feasible to do enough wind and solar to abate emissions to that degree."
@Email:tcarlisle@thenational.ae