June 30, 2011
Oil and gas industry investments in alternative fuels
Why would an industry with its roots in fossil fuels look to other sources of energy?
By Martha Young
The oil and gas industry regularly receives negative press for its business practices, yet the media consistently fails to suggest viable, affordable alternative solutions to using the fossil fuel industry’s products. That’s because today there are no good solutions that are affordable to the general consumer.
The alternative energy spectrum of solutions continue to require massive investments in research and development, engineering, scalable manufacturing, interoperability, environmental assessment and connectivity into the power grid. Once installed, there are on-going costs associated with managing and maintaining the solution. Establishing uninterruptable, utility-grade alternative power sources is not a trivial undertaking, nor is it easily affordable.
Conceptually, using alternative energy sources is a good idea. The science is irrefutable regarding environmental and health related impacts associated with coal-powered facilities. For the naysayers, go to
SkepticalScience.com for clarity. However, the bottom line, especially in the current economy, comes down to dollars and cents.
The average consumer doesn’t have the wallet capacity, nor do the utility companies. The federal government has tapered direct investment and is significantly reducing its loan guarantee program. Wall Street and the capital markets have a limited stomach for the current levels of risk associated with commercializing alternatives.
U.S. Rep. Doug Lamborn, R-Colorado, has even gone so far as to request cutting the funding for NREL, the Golden-based federal laboratory established to assist in the technology transfer and commercialization of promising alternative energy solutions. Those 5500 jobs aren’t in his district, nor are the 500 Vestas manufacturing positions in Pueblo. What is this man thinking? But I digress.
Money. Where is investment capital available to move alternative energy solutions forward to commercialization? Two key industries: high technology and oil and gas. High technology investments will be covered in the next article.
The oil and gas industry has been experiencing record profits. Some of those profits have been invested in alternative energy R&D, partnerships with research institutions, and test facilities for scalability and commercialization.
The following table illustrates which alternative energy technologies the top six oil and gas companies have been investing billions of dollars over the past three years.
Company
Geothermal
Wind
Solar
CCS
Biofuels
BP
X
X
X
X
Chevron
X
X
X
ConocoPhillips
X
X
X
X
ExxonMobil
X
Royal Dutch Shell
X
X
X
Total Petroleum
X
X
X
(CCS = carbon capture and sequestration)
The oil and gas industry has made significant investments in research and development, and implementation of alternative energy solutions. Why would an industry, with its roots in fossil fuels look to other sources of energy?
- One key to the answer will be found in nomenclature. The oil and gas industry should be viewed as the energy industry. When viewed through a new lens, it makes perfect sense for these players to want to continue to grow their businesses in support of meeting global energy demands.
- The players in the energy industry are aware of an increasing global population with energy requirements in excess of what can be provided under traditional means.
- All of the super players acknowledge climate change as a serious issue in their annual reports and corporate social responsibility reports and the need to reduce greenhouse gases. They are diligent in monitoring and measuring their own CO2outputs and have been taking measures to reduce their carbon footprint.
- This particular industry has been experiencing record profits year over year. They have the capital necessary to make significant investments in promising technologies.
- This particular industry has invested trillions of dollars over its 150+ year history in plant and equipment, pipelines, container vessels, tanker trucks, land leases, specialized engineering and other assets. All of these assets are readily transferable to other methods of producing energy.
- The players in the traditional energy market have decades of experience in helping to define and shape public policy specific to energy production and distribution. This experience is rich and deep.
- Traditional energy producers have a fiduciary responsibility to their stakeholders. By investing in alternative energy there is a significant potential for increased revenue streams through research and development efforts as well as successful spinoffs.
- The extraction industry has a global presence. Through its geopolitical influences the industry is able to assist governments in emerging markets in making long-term energy decisions that are best for the constituents, the country and the planet.
To review the complete research on oil and gas investments in alternative energies, go to
IDC Energy Insights.
Good ideas are only good when they can be implemented. It will take billions, if not trillions of dollars to migrate the global economy from fossil fuels to alternative energy solutions. Rather than grousing about the oil and gas industry while continuing to consume its products at increasing levels, consider applauding these players for the extensive efforts and investments they continue to make it bridging the chasm from traditional energy sources to alternative energies.
About Martha Young
Martha Young is principal at NovaAmber, LLC, a business strategy company based in Golden. Young has held positions as industry analyst, director of market research, competitive intelligence analyst, and sales associate. She has written books, articles, and papers regarding the intersection of technology and business for over 15 years. She has co-authored four books on the topics of virtual business processes, virtual business implementations, and project management for IT. Young can be reached at myoung@novaamber.com or on Twitter @myoung_vbiz
