05 Feb 2010
On 4 February 2010, London Business School hosted the inaugural lecture of the Business Leaders Series by Tony Hayward, CEO of BP. Hayward was introduced by Professor Sir Andrew Likierman, Dean of London Business School, who confirmed the School’s ongoing interest in the energy debate and highlighted, among other things, the School’s involvement in the Cleantech Challenge, a project hosted in partnership with University College.
Tony Hayward, who joined BP in 1982 as a geologist and became CEO in 2007, began his speech by reiterating that energy security is at the top of the global and economic agenda, and at the heart of the Climate Conference in Copenhagen in December 2009. He reinforced the need to address the issue of climate change and energy job security, which is likely to dominate politics and policy-making for the next 12 months.
Hayward stressed the need to consider energy security in terms of three major factors:• Diversity;
Hayward stated that there was an increase in people transitioning to middle-class energy consumption and therefore there was a need to consider how that demand would be met. At present, one per cent of total energy consumption is renewable energy; by 2030, only five per cent of total consumption will be renewable energy.
However, it is estimated that we have 40 years of oil and 60 years of gas left at today’s consumption so, whatever the energy of the future is, it will still have oil as a major part. BP has committed to investing US$40 billion in low carbon emission technology and is looking at the carbon-heavy oil from Canada as an alternative energy source. Hayward stressed the importance of energy resources opening up to competition as the most efficient way to cutting emissions. He pointed out that the Copenhagen Climate Conference was not a failure, as had been reported in the media – for the first time since the climate debate began all the countries involved were aligned and in principle agreed, which is a huge step forward in the debate. He cited the United States and China as being politically committed to taking significant action to dramatically improve energy efficiency, which was a significant advancement. The conference also marked a new ‘landmark in energy realism’ regarding climate change – a key to action that signified ‘alignment’ as much more important than ‘agreement’.
Also noted was that each region in the world needed to assess its energy pathway and put in place a sustainable framework to reduce emissions whilst meeting demand. So, transport needed to become more fuel efficient and natural gas needed to be utilised more. He referred to Norway and Africa as alternative sources of energy supply - therefore the perceived ‘dependency’ on Russia as a supplier was perhaps overstated - and reiterated the need to break down barriers between energy grids to move towards a single energy market.
Referring to the recent cold spell in the UK, Hayward added that, despite the media hype, it was possible to meet the demand without a major spike in prices or impact on gas supplies. He cited the issue of supply versus demand on the need to invest in infrastructure and reiterated the need for governments to act to maintain a diverse energy supply without underplaying the role of natural energy – in particular distinguishing between energy security (which is achievable) and energy independence (which is costly and unrealistic).
In conclusion, Hayward stated that in order to maintain and enhance a sustainable energy supply, the challenge is to create a low carbon economy requiring reengineering of the global economy, a complex task involving:
• Efficiency – the most efficient approach;
• Diversity – no one ‘solution’ or ‘technology’;
• Competition - efficient market mechanisms to distribute energy and induce change.
The lecture was followed by a lively question and answer session from the audience, which included the Rt Hon Patricia Hewitt, MP, former Secretary of State for Health and an Honorary Fellow of the School.