Amid the fight among giant oil companies to maximize market share from current energy demand when global energy markets are evolving towards renewable energy, Total announced a surprising move to leave the US oil and gas industry association, the American Petroleum Institute (API), over differing climate positions.
Total's decision came just one day after the company announced the discovery of a new oil well offshore Suriname in South America on Jan. 14, a move that contradicts its emissions aim of 'Getting to Net Zero' and which Total argued the API was only 'partially aligned' with.
The API's support for the rollback of US regulation on methane emissions regarding transport decarbonization is also not in alignment with Total.
The API's involvement in the Transportation Fairness Alliance, launched by Big Oil to 'to ensure all Americans are treated equally when it comes to their transportation choices' but some would argue undermines policies on boosting the use of electric vehicles and in reducing American drivers' consumption of gasoline, does not sit well with Total. The API and Total also hold differing positions on the carbon pricing principle.
The decision not to renew its API membership for 2021 was not Total's first.
The group had dropped out of the Calgary-based Canadian Association of Petroleum Producers last July and wrote off $7 billion worth of oil sands assets in Alberta, citing a 'misalignment' between the organization’s public positions and those expressed in Total’s climate ambitions.
Energy market analyst of Price Futures Group, Phil Flynn, said this move 'is political to gain favor with the incoming Biden Administration.'
The company added one more divergence with API, which was API's 'support during the recent elections to candidates who argued against the United States’ participation in the Paris Agreement.'
'Total is playing nice to gain favor,' Flynn said, arguing that the company was looking for political cover as Biden is signaling war against oil.
'Biden is looking at making energy companies pay and Total is in the crosshairs,' he said.
- European firms more outspoken in supporting climate policies
Total's decision to leave the API is a reflection of the dual rift between European and US major oil companies, and between oil companies and their trade organizations, said Antoine Halff, an adjunct senior research scholar at Columbia University's Center on Global Energy Policy.
'If you look at the public posture of companies in the O&G [oil and gas] sector on climate change, you’ll find that European firms have been generally much more outspoken in their support of a robust climate policy than their US counterparts,' said Halff, who was also a former head of oil analysis at the International Energy Agency.
It took four years for US oil companies ExxonMobil, Chevron and Occidental Petroleum to join the 10 companies that founded the CEO-led organization that aims to lead the industry response to climate change, the Oil and Gas Climate Initiative in September 2014, of which six were European majors, he said.
He maintained that trade organizations always tend to lag behind their members on the more forward-looking progressive issues of the day.
'It is fair to say that US trade organizations like the API, the Association of Fuel and Petrochemical Manufacturers (AFPM), the Western States Petroleum Association (WSPA) or the Western Energy Alliance (WEA), despite some movement in recent years, remain far more conservative on climate policy than their largest and most prominent members.'
Halff said Total's departure from the API was just the latest case of a major European oil and gas company leaving a US trade organization over climate policy.
He said the trend started with Shell leaving AFPM in April 2019, followed by Total in November that year and BP in March 2020 in the wake of a six-month in-depth review of the climate positions of 30 trade associations.
The same review led BP to quit the WSPA and WEA and to put API on notice as one of the 'associations deemed as partially aligned' with it on climate.
'In particular,' Halff said, BP quoted the API's 'opposition to direct regulation of methane,' which BP supports.
He added that Total’s exit from the API was not a surprise given the strong leadership of Total on climate and the energy transition; and the more conservative positioning of the API.
'It's worth noting that European companies started leaving US trade associations in 2019,' Halff said, 'but the latest announcement follows the election of Joe Biden whose position on climate can be described as the polar opposite of Trump’s.'
Halff acknowledged the important and positive role of trade organizations like the API in setting safety and fuel standards for the industry as a whole, which he said may be particularly true of the API which cuts across all aspects of the oil and gas industry — upstream, midstream and downstream.
However, he warned 'as the industry faces the existential threat of climate change and of peak oil and gas demand, these organizations are finding it difficult to evolve as fast as circumstances might warrant.'
'The wider their membership, the more difficult it is in many ways for them to adjust in the face of rapid changes in their social-political, economic, technological and competitive environment,' he said.
Halff said Total was not a core member of the API and the impact of its departure may in and of itself be relatively benign. Nonetheless, he warned that for trade organizations, the trend among their European members 'should serve as a wakeup call and a prod to pick up the pace of adjustment, lest their US members start following suit.'
By Sibel Morrow