NEWS ANALYSIS: Norway’s state oil company Statoil, faced with much lower prices for what it sells, is launching a more offensive climate strategy. It’s suddenly showing more interest in renewable energy projects and even admits that its highly controversial oil sands project in Canada probably wouldn’t have been approved today.
In an interview with Oslo-based newspaper Dagens Næringsliv (DN), Statoil’s longtime director of strategic planning John Knight was singing a decidedly different tune than what he and and top Statoil directors have belted out for years. After spending billions and staunchly defending the company’s investment in the oil sands project in Alberta, for example, Knight now concedes that it probably wasn’t such a good idea after all.
“When we went into oil sands (around 2007), we knew it would be challenging,” Knight told DN. Statoil officials were aware that the process of extracting oil from what often are also called “tar sands” demanded lots of energy, while environmentalists complained loudly over the high degree of carbon emissions generated by activity that also tears up the landscape.
Statoil was welcome in Canada, however, and Knight claims Statoil “set ambitious goals” to reduce emissions tied to oil production. Emissions remained a problem, though. Knight, in his interview with DN, tried to excuse them by saying that the “potential climate effect of the oil sands project is much clearer now than it was in 2007.”
Costs also rose markedly in the entire oil industry, Knight said, prompting Statoil to postpone one of its two ongoing oil sands projects. He noted that Statoil “succeeded in creating value” from its oil sands venture, selling off 40 percent of it in 2010. That seemed to justify, in Statoil’s view, the investment in the oil sands project that even a former government minister for the environment tried to get Statoil to pull out of because of climate concerns.
“If we knew then what we know now, I don’t think we would have gone into the (oil sands) project,” said Knight, who’s among the candidates to take over as chief executive of Statoil after Helge Lund, who quit last fall after 10 years at the helm of Norway’s biggest company.
Knight, a British lawyer from Cambridge, worked for investment banks before he started working in Statoil’s international division in 2002. He most recently has been responsible for strategic planning and Statoil’s major transactions, working out of the company’s office in London. Most analysts think Statoil’s board will ultimately choose a Norwegian to lead the company, in which the Norwegian state still owns a 67 percent stake but Knight told DN he is open to the task and would accept the CEO’s job if offered it.
His interview with DN could almost be viewed as part of his campaign to win the post. Knight has rarely appeared in Norwegian media before, and chose DN to signal a major shift in Statoil’s strategy to put more emphasis on more climate-friendly operations. That grabbed the attention of environmental activists in Norway, who have been constantly criticizing Statoil’s fossil fuels operations, especially the oil sands project and Statoil’s lust for more oil exploration and production in the Arctic and off the coast of scenic Lofoten and Vesterålen.
Amazing new tone
“I’m almost speechless,” Martin Norman of Greenpeace told DN after hearing Knight’s new signals. Norman has appeared at every single annual meeting of Statoil since 2008, calling on Statoil to pull out of its oil sands operation. He’s not sure which new information has finally swayed Statoil, noting that global warming has been an issue at least since 1992. Norman is nonetheless cautiously optimistic, if amazed, that Knight and Statoil are finally grasping it.
Others also are glad to hear Statoil’s tone changing on climate issues, but analyst Anne Gjøen at Handelsbanken wasn’t surprised. She doesn’t think Statoil’s “new thinking” is entirely motivated by climate concerns, but also by the high costs of oil extraction, not least from oil sands.
Knight went on to say that Statoil is mounting a new climate-oriented offensive. DN reported that Knight actually has been responsible for Statoil’s climate strategy since 2013. He now indicates both he and Statoil are taking the threat to the global climate more seriously.
Business as usual ‘not an alternative’
The time is definitely ripe, Knight said, to see what more Statoil can do. In addition to reducing oil sands activity, he has identified five areas to make Statoil more climate-friendly, including more investment in renewable energy projects, more use of new technology and emphasis on biofuels. The company has long been active in offshore wind projects, or example, and will evaluate further investment. Statoil management will need to become more climate-conscious.
“Business as usual is not an alternative, it’s not sustainable,” Knight told DN. “We’re already doing a lot,” he added, but said Statoil “must do more” in regards to cutting carbon emissions and taking into account the climate effects of its portfolio. Analyst Gjøen is skeptical Statoil can make any radical changes in direction, noting the company isn’t known for being good at keeping costs down. Alternative energy projects can be expensive, nor, she said, does Statoil have the in-house competence at present.
Knight disagrees. He thinks Statoil’s “open and innovative” culture can make it a leader within climate and energy technology, and that it will be able to combine that with earning money for shareholders. Companies that lack perspective beyond short-term value creation won’t succeed, he said.
Statoil was often accused of failing to cooperate with the former left-center government’s much-hyped carbon capture and storage project at the Mongstad plant, often dubbed as former Prime Minister Jens Stoltenberg’s “moonlanding” that crashed. Knight now claims the company will follow up visions with action. “Looking at other renewable energy projects will be natural,” he said. “We have groups following developments … and also developments in battery technology and other technology that can change the energy picture.”
He also believes 2015 will be a turning point in the climate debate. The latest UN climate report warned of temperature increases after 2040 that will have serious consequences for life on the planet, Knight noted. “In 2040 I may be dead, but my youngest son George will be alive,” he told DN. “Both as individuals and as business leaders, we have to relate to that.”