The best place on earth to learn where we are and where we’re headed is S&P Global’s international energy conference CERAWeek that just wrapped in Houston, Texas. It’s been running for 39 years and is produced by Daniel Yergin, the Pulitzer winning author of “The Prize,” the authoritative history of the oil and gas industry. CERA Week used to be a showcase for the major oil and gas companies. Fortunately, CERA added a wing for the conference devoted to the Clean Energy Transition (CET) innovators and companies a few years ago.
This year THE CET WAS INDISPUTABLY THE MAIN EVENT at the conference. There was massive buzz and energy at hundreds of presentations and thousands of attendees paying rapt attention to every CET discussion. Most of the oil/gas guys were still there and they’re rightly taking credit for delivering fossil fuel supplies to Europe in the midst of Putin’s war. But they all now acknowledge the necessity of the CET. Some just say it needs to be better “managed,” while others are capitalizing on the myriad opportunities it presents.
Senior officials from executive recruiter Korn Ferry’s Houston office summed up the state of play. Searches for senior oil/gas executives are down 90% year over year while the need for executives in CET is exploding. It has been widely reported that a skills shortage imperils the energy transition and GM’s recent announcement of a sharp cut and buy-out for its ICE vehicle white collar executives is just another indication that the future of the CET is now.
John Podesta, Biden’s climate czar and Jennifer Granholm, Biden’s Secretary of Energy, were practically dancing on the tables with news on the IRA and Infrastructure funding of the CET. With hundreds of billions on offer, discussion about the IRA was pervasive and universally positive throughout the conference. Podesta’s team is working 24/7 to get the treasury rules completed so companies can know how it’s going to work. Granholm’s team is working full throttle to identify and fund leading edge CET innovators and CET projects with billions of dollars of outright grants and low cost loans. Granholm said “I’m obsessed with geothermal . . . The problem of supplying dispatchable, baseload, clean power is what keeps me up at night, and geothermal is the solution.” Both acknowledged the alarming regulatory bottlenecks in the way of rebuilding the US grid, permitting CET industries and mining projects, and building pipelines for both hydrogen and oil and gas delivery. They pledged to do better with what they have and get a Joe Manchin permitting reform law passed in Congress.
We were genuinely surprised by the progress since just last year’s CERAWeek on the big three unknowns: Carbon Capture, Hydrogen and Nuclear. We’ve been skeptical of all three. Occidental Petroleum (OXY) displayed a mockup of a 500,000 tons per year direct air CO2 capture and sequestration facility it has broken ground on at the King Ranch in the Texas Permian in partnership with Carbon Engineering. OXY is the CET leader among the oil majors and its CEO Vicki Hollub’s speech was the week’s stand out. She also wants her company to invest in the nuclear and lithium spaces. It’s Warren Buffett’s largest holding and his most profitable position in 2022. He’s still buying more shares in March 2023.
Hydrogen, a clean fuel when made right, is a big part of the solution to replace natural gas for heavy industry and other applications. The CERAWeek “Hydrogen Hub” pavilion was in constant motion with real world advances on lower cost production, delivery and storage technologies flying out at the audience. Making ammonia and methanol fuels from hydrogen solves for the hydrogen storage and transportation problem. Nobody at the conference disputed the need for nuclear and the possibility for small modular reactors and even fusion seem far more real and sooner than just 12 months ago.
Was there any negative commentary on Environmental Social and Governance (ESG) as factors that investors and companies should consider? Not that we heard. There’s a big discrepancy between the real world of energy commerce and what the politicians are yakking about.