Big Oil to take centerstage at Houston meet as markets, alliances shift

(C) Reuters. FILE PHOTO: Signage for the CERAWeek energy conference is displayed at the entrance of the Hilton Americas-Houston, in Houston, Texas, U.S. March 9, 2022. REUTERS/Sabrina Valle/File Photo

By Liz Hampton

HOUSTON (Reuters) -Top energy executives and officials from around the world will descend on Houston next week just as the political fallout from Russia’s invasion of Ukraine a year ago continues to distort global oil supply lines and put long-term energy security front of mind for governments.

Oil company chiefs and ministers will make their case for investment in all forms of energy – fossil fuels and renewables – to meet rising demand and at the same time accelerate the move toward the low-carbon industry of the future.

A record 7,000 people have signed up for the week-long CERAWeek discussion of fossil fuels, clean energy, advanced energy storage.

The war in Ukraine sparked a rally in crude oil and fuel prices that led to record industry profits, prompting the U.S. government and others to accuse Big Oil of profiteering and for Britain and some other governments to impose windfall taxes on energy companies.

Big Oil executives and U.S. government officials will likely trade blows publicly again as they did at last year’s event. While the U.S. and many Western governments continue to call on oil firms to pump more, executives at top oil firms say they have a duty to their shareholders to maximize returns for staying invested in an industry which faces an uncertain long-term future.

This year’s presenters also reflect ongoing clashes over supply and demand between the Organization of the Petroleum Exporting Countries, Europe and the U.S. that have led to some visible vacancies.

Instead, Shell (LON:RDSa)’s newly-appointed Chief Executive Wael Sawan will join BP (NYSE:BP)’s Bernard Looney, Exxon Mobil Corp (NYSE:XOM)’s Darren Woods, Chevron (NYSE:CVX)’s Michael Wirth and TotalEnergies’ Patrick Pouyanne in prominent roles.

“We will get a sense of how companies’ strategies have been changed by the events of the last year,” said Dan Yergin, the Pulitzer Prize-winning author and vice chairman of conference organizer S&P Global (NYSE:SPGI), in an interview.

BP’s Looney will share the stage with Hertz car-rental CEO Stephen Scherr, whose firm has become an energy transition champion with plans to buy tens of thousands of electric vehicles from General Motors (NYSE:GM) , Polestar and Tesla (NASDAQ:TSLA) .

“The industry is on board with the energy transition, ESG and decarbonization, but there is a recognition that we are going to need hydrocarbons from an energy reliability and security standpoint,” Pat Jelinek, EY Americas oil and gas leader, said of the return to prominence of Big Oil executives.

WHERE’S OPEC AND SHALE?

Speakers include oil ministers from Africa and Asia, where balancing energy security and the threat of climate change are paramount. There are no officials from Russia, which in the past has sent its energy minister, and much fewer OPEC participants.

Noticeably absent from the agenda are oil ministers from Saudi Arabia, Iraq, Kuwait and the United Arab Emirates. OPEC’s output cut of 2 million barrels per day (bpd) last November led to a bitter row with the U.S., as President Joe Biden was fighting mid-term elections and high gasoline prices – issues that nearly cost him a majority in both houses.

Top shale executives also will get less of the limelight. U.S. shale also battled with the Biden administration over oil drilling restrictions and a lower investment in new output. Shale has become less of a factor in global markets, and tensions between OPEC and shale are less intense than they used to be.

Executives from shale bigs Hess Corp (NYSE:HES), EQT Corp (NYSE:EQT) and Pioneer Natural Resources (NYSE:PXD) last year dined with the late OPEC Secretary General Mohammad Barkindo. Barkindo received a gift bottle of “Genuine Barnett Shale,” the oilfield that launched the shale revolution.

U.S. shale also has been overshadowed by Big Oil as the companies grapple with slower gains and tight-fisted investors. Total U.S. oil production is forecast to rise modestly this year – less than 600,000 bpd – compared with a jump of about 2 million-bpd in 2018.

“U.S. exploration and production companies have moderated growth,” said Andy Hendricks, CEO of U.S. driller Patterson-UTI (NASDAQ:PTEN), leaving OPEC “in charge of oil prices.”

ENERGY INNOVATION

While geopolitical strife continues elsewhere, next week’s get-together will feature technological innovation in oil and liquefied natural gas (LNG) alongside, electric power, hydrogen and carbon capture.

“There’s never been such a focus on innovation of technologies across the energy industries,” said S&P’s Yergin.

Some 225 start-ups will participate, a 60% increase from a last year, many of which got a shot in the arm from Biden’s Inflation Reduction Act, which provides tax credits and incentives for low-carbon and clean energy technology.

U.S. Energy Secretary Jennifer Granholm and White House clean energy advisor John Podesta will lay out implementation of the Inflation Reduction Act, said S&P Global’s Yergin.

“The amount of renewables that we’re going to have to build over the next decade is enormous, and I don’t think everybody has really digested the scope of that,” said Andres Gluski, CEO of energy and utility giant AES (NYSE:AES) Corp.