Fortune Global Forum 2023: The Global Energy Transition
Majid Jafar, Chief Executive Officer, Crescent Petroleum Francesco La Camera, Director-General, International Renewable Energy Agency In conversation with: Peter Vanham, Executive Editor, FORTUNE; Co-chair, Fortune Global Forum
Transcript
00:00 So let's stay on the topic of climate and sustainability.
00:03 A recent report put together by the United Nations
00:07 found that if current projections hold
00:09 20 major fossil fuel producing nations
00:13 will make approximately 110% more fossil fuels in 2030,
00:18 than the quantity consistent with limiting global warming
00:22 to 1.5 degree Celsius.
00:26 The UN Secretary General says these governments
00:28 are doubling down on fossil fuel production,
00:31 and that spells double trouble
00:33 for both people and the planet.
00:36 While the goal of limiting global warming
00:39 is a challenging one, it's not impossible to reach.
00:43 So let's talk about the innovative forms of renewable energy
00:46 that are emerging in an effort to keep combating
00:50 climate change whilst serving all stakeholders.
00:54 Joining Fortune Executive Editor
00:56 and Fortune Global Forum Co-Chair Peter Vanam
00:59 for this conversation, are Majid Jaffar,
01:03 CEO of Crescent Petroleum,
01:05 which is the oldest and largest private sector
01:08 energy company in the Middle East,
01:11 and Francesco Lacamera, Director General
01:14 of the International Renewable Energy Agency,
01:17 which works to promote and accelerate
01:19 the adoption of renewable energy sources worldwide.
01:23 Please welcome them to the Fortune Global Forum.
01:26 (upbeat music)
01:28 - Well, hello, it's good to see everyone here.
01:42 And I must say, of course,
01:43 we are gonna address in this debate,
01:46 obviously, the elephant in the room.
01:49 And I think you all know what the elephant in the room is
01:51 for the gentlemen here, which is tie or no tie.
01:55 And you can see that we have two contestants here.
01:59 Francesco, you went with a tie and Majid, you did not.
02:03 Do you care to comment?
02:04 - Well, I don't have as cool shoes as Francesco,
02:06 so that's why I went without a tie.
02:09 - Neither of us does.
02:10 - I have a few things in the day
02:12 where I need to have a tie.
02:15 So I signed an agreement today and there's a photo,
02:17 you must have a tie.
02:19 - We appreciate that.
02:20 Now, I wanna move to the actual elephant in the room,
02:23 which in the energy transition debate, of course,
02:26 is the role of oil and gas, fossil fuels versus renewables.
02:31 And we're in a great place to talk about that here
02:34 and have great guests to talk about that.
02:37 I wanna start with you, Francesco,
02:38 because you represent
02:40 the International Renewable Energy Agency,
02:43 which obviously is advocating renewables.
02:47 And you're also based here in Abu Dhabi.
02:50 The offices are here.
02:51 I think some of us actually passed by
02:53 if you remember that this morning in Masdar City
02:55 at your beautiful headquarters.
02:58 So tell us how you see the role of oil and gas
03:01 producing countries and companies
03:04 in this transition towards renewables.
03:07 - So we have to set the scene
03:09 for saying what could be the role.
03:12 So for us, our Bible is the IPPC report on the 1.5.
03:19 So this means that at 2030,
03:23 we have to decrease our CO2 emission by 43%.
03:27 - This is global?
03:29 43%? - It's global.
03:31 And naturally, this means that the fossil fuel sector
03:34 is to decline for having less emission there.
03:39 In the same time, we have not to create a disruption
03:43 in the energy markets.
03:47 So the gap between supply,
03:50 that should decline the fossil fuel,
03:51 and demand should be covered.
03:54 And this is what is renewable energy is from
03:57 in this particular moment.
03:59 And this is the reason also for us
04:01 for calling on the triple of renewable installed capacity
04:05 until 11 terabytes and 2030.
04:07 So this is a number that is just a translation
04:12 of what is the IPCC report in terms of gigabit.
04:15 - That's a scientific sort of consensus,
04:18 decline by 43% CO2 emissions.
04:22 Now obviously, different countries and different companies
04:24 will have different interests in that equation.
04:27 But are you confident, do you believe it's probable
04:32 that everyone will be pulling at the same side here
04:35 in that joint ambition for 2030?
04:38 - You know, the climate change puts everyone
04:42 in front of the same question.
04:44 So there is no one that can do something different
04:48 from the others.
04:49 So we have, this is a common goal,
04:51 and we have to contribute to that goal.
04:54 And naturally, country and their sector
04:57 should contribute differently based on their circumstances.
05:00 It's just also the language of the Paris Agreement.
05:03 - I wonder if in a previous life,
05:05 you were a politician, Francesco,
05:06 because you treaded that needle very carefully.
05:09 But we actually have somebody here
05:11 who can talk about their particular interests,
05:14 which is Majid.
05:15 You run a company which is called Crescent Petroleum.
05:18 So does that mean that by 2030,
05:22 your company will be called Crescent Sun, Wind and Water?
05:26 Or how do you see that transition for your company?
05:29 - So first of all, I think we step back.
05:31 We've only been given 20 minutes to cover global energy.
05:33 - Yeah, it's more than enough time.
05:35 - Which is an important topic, and obviously I'm biased,
05:37 but without energy, which is the lifeblood of the economy,
05:41 none of the other panel sessions
05:42 would have anything to talk about.
05:43 So I think that's an, and I encourage all of you as leaders,
05:46 understand energy more,
05:48 understand where your own energy comes from
05:50 for your businesses, even in your homes.
05:53 I think that awareness out there,
05:55 outside of our sector is lacking, and that's important.
05:59 If we look at the world today,
06:01 we have at the moment more energy used
06:03 by the one billion people in the OECD,
06:05 in the rich countries,
06:07 than the rest of the world combined,
06:08 the other seven billion.
06:10 And we still have nearly two and a half billion people
06:12 without clean cooking solution,
06:14 850, 900 million without electricity,
06:17 and that number is still rising.
06:19 So we must remember the needs,
06:22 the development needs of those developing countries.
06:25 - So it's not only transition--
06:26 - And actually, that is where the net increase
06:28 is coming from for emissions.
06:30 It's not in Europe or the US,
06:32 where emissions have actually been falling.
06:33 And that's where more of the investment
06:36 and the finance is needed.
06:37 And the trebling of renewable energy
06:40 is now a common goal the UAE has called for,
06:43 President Xi and President Biden more recently.
06:47 In reality, to replace the current system,
06:50 you would need 100 times more, not three times more.
06:53 And so far, renewable energy, and it's very important,
06:56 and it's contributing more and more,
06:58 and the costs have come down,
06:59 although there are limits set by physics
07:01 to how far they can come down,
07:03 has been a supplement, a complement.
07:05 It has not--
07:06 - It has not been able to--
07:07 - It has not met the total increase
07:09 in global energy demand.
07:10 It's just about now in the last year
07:12 met the increase in electricity demand,
07:14 which is an important milestone.
07:15 - I think in fact, oil and gas use
07:17 has been at an all-time high in 2022.
07:20 - So I think we need to recognize
07:21 that we will continue to need.
07:23 Now, when is it gonna peak, the demand of oil?
07:25 Is it now already peaked, or is it in a few decades?
07:28 The reality is we lose five to seven million barrels a day
07:31 annually from decline rates of old fields.
07:33 So you need to add a new Saudi Arabia every two years
07:36 just to maintain the current demand.
07:39 And natural gas is playing a fundamental role
07:42 backing up renewables.
07:44 When the sun is not shining and the wind isn't blowing,
07:46 you need something, and it's 200 times more cost-effective
07:49 than using batteries, for example.
07:51 - Right, so I wanna talk about that,
07:52 because I think you want to distinguish
07:55 between oil and coal, of course,
07:59 and then the use of natural gas as a fossil fuel.
08:02 Why do you find that so important
08:04 to highlight the role of natural gas
08:07 in a transition towards a net-zero economy?
08:10 - So I think uses of energy are what defines the difference.
08:15 So gas is for power, as is renewables, right?
08:19 And coal, unfortunately, by not investing in gas,
08:23 we've seen more burning of coal in developing countries,
08:25 namely China and India, which uses,
08:27 the two countries use 70% of the world coal,
08:29 which is why emissions have been going up,
08:32 and the cost was going up,
08:33 and we had energy supply shocks last winter.
08:35 So we were failing on all three legs
08:37 of the sustainability, affordability, availability,
08:40 the so-called energy trilemma.
08:43 Oil, on the other hand, even if you replace light transport,
08:46 we still have trucking, shipping, and air,
08:48 people are working on cleaner solutions for those,
08:51 and you have petrochemicals.
08:52 Everything the transition is relying upon,
08:55 whether it's the solar panels or the wind turbines
08:58 or the electric cars themselves,
08:59 from their tires to their interiors,
09:00 is actually made of oil and medicines
09:03 and the reliance in the food sector.
09:05 I think these are underappreciated,
09:07 the different uses of energy and the continuing needs
09:11 through the energy transition
09:12 for the different forms of energy.
09:13 So I think it's not a versus, as you said,
09:15 it's all of the above and a lot more,
09:19 and a key area where I'm not seeing enough investment
09:22 is also in the grids,
09:23 and in particular in transmission distribution.
09:26 There's a focus on the generation only,
09:28 and there needs to be a lot more investment on that
09:31 if there's gonna be more electrification.
09:33 - Briefly, before I get back to Francesco,
09:35 when he talks about those 2030 goals,
09:37 decline of 43% of global CO2 emissions,
09:40 is that an ambition that you share, that you understand,
09:42 that you stand behind on a global level?
09:44 - So I think for us as an industry, first of all,
09:48 understanding how what we produce contributes positively.
09:51 So we are in the developing countries,
09:53 we're not in rich countries.
09:54 We are here in the Middle East,
09:55 and we went from 50 years ago an oil producer,
09:57 now we are 85% a gas producer.
10:00 The gas we produce in this region
10:02 by displacing diesel for power generation
10:05 avoids more than five million tons of CO2 a year,
10:07 which is more than all the Teslas in the planet.
10:10 But how we produce must be cleaner.
10:12 So we've spent seven years reducing our emissions,
10:15 reducing flaring to basically zero,
10:17 and then offsetting the remainder,
10:18 supporting wind power projects in China and Mongolia
10:21 and places like that,
10:23 to achieve carbon neutral production two years ago,
10:26 and we've sustained that.
10:27 So how we use it is going to change,
10:29 and how we produce it must be decarbonized.
10:32 - Right.
10:34 But so do you support that analysis
10:35 that we need to decline our dependency on--
10:37 - I mean, that is a global target
10:41 set by different organizations,
10:43 and there's debate, and upcoming in COP,
10:45 there'll be a lot of work by governments on that.
10:48 What I'm talking about is the role of us
10:50 as private sector companies in our own businesses.
10:53 - Francesco, so now we've heard from somebody
10:55 who obviously produces oil and gas.
10:59 You advocate, obviously, for renewables.
11:01 What are, for you, the most promising renewables,
11:04 acknowledging, of course, this other reality
11:07 that we're gonna ramp up production,
11:08 have to ramp up capacity,
11:12 and that so far, renewables have only played
11:14 what Majid says is a complementary role?
11:16 - So first of all, concerning the complementary role,
11:23 the fact is that in the last year,
11:26 83% of the new standard capacity was renewables.
11:29 - Electricity, not total energy.
11:31 - Power. - Right, total energy.
11:33 - And concerning the heavy sector,
11:35 the most clean way to manage it
11:41 is through hydrogen, and the green hydrogen mainly,
11:45 and concerning transport along Schencki,
11:47 biofuel, also hydrogen could be used.
11:51 So that's-- - So hydrogen is, for you,
11:54 one of the most promising renewables.
11:56 - You know, I don't like this kind of question,
11:59 in which sense?
12:00 All the type of renewables are my children.
12:02 - I wish I could take it back,
12:03 but unfortunately, we're on a station.
12:04 - Are my children, no?
12:06 And I always like to look at those
12:10 as a holistic answer to the problem.
12:15 So for example, country that have long hydropower,
12:22 capacity, so they have the best natural battery in the world
12:26 so they can arrange their system
12:28 on the best of that. - Yeah.
12:29 - So it depends on the characteristics.
12:31 There are country where wind is blowing,
12:33 where the sun is shining.
12:34 So what is important, and I think you completely agree
12:37 with him, if I can react on what he say,
12:39 that we have to pay lots of more attention to the grids,
12:43 the interconnectivity, the balancing,
12:45 the flexibility of the grid, but also the port
12:49 will change naturally.
12:50 If you go to the Dubai port,
12:51 you will see how this port is changing its nature
12:54 to be ready for the next energy system,
12:57 not to the past one.
12:59 - And do you believe, 'cause you've been focusing on,
13:01 we've been focusing on 2030,
13:02 which is almost six years away only,
13:05 do you believe that hydrogen can become widely available
13:11 in six years?
13:13 I don't think we've seen that so far.
13:14 - This bring me to the usual anecdote
13:18 that I want to present here.
13:20 It was 2021, so less than two years ago,
13:25 when Bloomberg come to, during the summer,
13:28 say that hydrogen was going to be competitive at 2050,
13:32 where finally it can be produced with $2 per ton, no?
13:36 - Yeah, that's far way away, of course.
13:38 - Yes. - Not 2030.
13:39 - We came later and say that was going to be competitive
13:42 in 2030.
13:44 Now this country is already exporting hydrogen
13:47 and is almost there to be competitive.
13:50 So this, I make this an anecdote
13:52 for showing how dramatic are the changes.
13:56 You remember that renewables a few years ago
13:59 were still considered niche.
14:01 Now it's what it is, no?
14:03 - Right, 83% you said last year.
14:05 - Always on a capacity for power, naturally, yes.
14:08 - Majid, if you hear that,
14:10 these incredible advances in technology,
14:13 price is coming down essentially,
14:16 we can imagine, of course,
14:17 that you would be starting to invest also
14:20 in renewable energy.
14:22 If you do that, do you have the ability,
14:25 beyond your financial ability,
14:27 do you have the ability to do that
14:29 with the people that you have
14:31 and with the capacity that you have?
14:33 - So there's a lot of debate in the oil and gas sector.
14:35 Should you also be a renewables company
14:37 or should you focus on doing what you're doing,
14:39 but decarbonize it?
14:40 And that debate is somewhat across the Atlantic now
14:43 between the US companies that are more in the latter camp
14:45 and the European companies that are more in the former.
14:48 My own view is it's quite a different business, renewables.
14:50 It's more of a utility and it's a finance game
14:53 and it's a different kind of risk reward balance.
14:56 I'm not convinced that oil and gas companies
14:58 can be the most effective in that sector.
15:01 However, they do need to focus on decarbonizing
15:05 their own products.
15:06 We do as a group, as the Crescent Group,
15:10 invest in clean energy companies.
15:11 I'm personally an investor in renewables,
15:14 also in hydropower in Europe.
15:18 So as a whole, those investments need to happen.
15:22 But also recognizing, I mean, you mentioned about cost.
15:25 Hydrogen today is cost prohibitive
15:28 and unfortunately, despite the amazing investments
15:31 that are being made by Adnok or Amco and others,
15:33 the market is not there.
15:34 They have tried in Europe and elsewhere.
15:36 People aren't willing to bear that cost,
15:38 but there are these pilot projects
15:39 trying to bring them down.
15:40 - Including here.
15:41 - Including here.
15:42 Energy is not, however, like digital.
15:45 You're not gonna have Moore's law
15:46 in dropping of costs, right?
15:48 We are getting close to the physics limits
15:51 for both solar and wind.
15:54 We're not gonna have 10 times the cost reductions,
15:56 for example.
15:57 We will still have some cost reductions,
15:59 but the big challenge is on storage, right?
16:01 A battery today to store a barrel worth of oil in energy
16:06 is about $200,000 worth of batteries
16:09 and it would weigh 20 tons, right?
16:11 And that is a significant challenge.
16:13 So there does need to be more investment,
16:15 as Bill Gates and others say,
16:17 in the technologies of the future,
16:19 not just the incremental improvements
16:21 in the technologies of the last century,
16:23 which is what we're living with today.
16:25 - So you're doing that separate,
16:26 your investments in renewable
16:28 and your investments in oil and gas,
16:30 particularly because you see a very big difference.
16:33 Finally, because we're gonna wrap up,
16:35 Francesco, you're laughing 'cause you know why.
16:37 You get the last question.
16:39 That means the last 60 seconds, you know, stresses on you.
16:42 Can we do that?
16:45 We're gonna talk about it at COP28 in a week's time.
16:49 Can we see that ramp up in renewables
16:51 or is it gonna be more like Majid says,
16:53 we're not there yet?
16:54 - We will see the COP28 will come
16:58 with a strong call for renewables.
17:00 I have no doubt.
17:02 I think the president's designators
17:04 already make this very clear
17:06 and we are working on that
17:08 and what is good that the call
17:10 or the president come on the basis of our number,
17:13 our analysis and our outlook.
17:15 So we are very proud of that.
17:18 Naturally, we have seen also some progress
17:20 in the loss and damage.
17:22 So we are quite confident that this is inevitable.
17:26 So I want to make this very clear.
17:30 We have no choice.
17:32 The question is not if we have to do or not.
17:35 We must do.
17:36 It's a different things.
17:38 We have to reimagine our world
17:41 where the ratio that there is today
17:45 between renewables and the rest will change
17:47 because it has to change and it will change.
17:51 So no one can stop this process.
17:54 The only aspect that is there
17:56 and I'm closing is the speed and the scale
17:59 that is the challenge is not where we are going.
18:02 - Right, we have to ramp that up.
18:03 We've tried to cover this debate
18:05 in the time that we had
18:07 and we hope of course that the energy world
18:09 will follow in the time that they have
18:11 which is about six years until 2030.
18:14 We want to thank both of you for joining in the debate
18:16 and thank all of you for listening to us.
18:18 Thank you so much.
18:19 - Grazie.
18:20 (upbeat music)
18:22 (upbeat music)
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