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Commentary: U.S. energy industry should shift focus when it comes to emissions

The global energy industry’s future relies on acknowledging human-induced global climate change, embracing efforts to mitigate carbon emissions and delivering more natural gas to displace coal and oil for generating electricity.

“Climate change is a fact, we have to accept that. But we can also be part of the solution,” said Patrick Pouyanne, CEO and president of Paris-based Total, one of the world’s largest integrated oil companies. That was the message from every major European energy company CEO speaking at the IHS Energy CERAWeek conference last week in Houston.

Those are fighting words in Texas, where many executives deny that climate change is real or that it’s manmade. But before dismissing the people responsible for hundreds of billions of dollars of capital as gullible liberals, consider that the world is awash in cheap natural gas and there are enormous gas liquefaction plants coming online in the next five years, some in Texas.

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Statoil CEO and President Elder Saertre said his Norwegian company supports international efforts to limit global warming that will restrict coal use. “Our industry is still perceived as part of the problem and not seen as wanting to be part of the solution,” he said. When asked about clean coal, Saertre said, “there’s no such thing.”

BP CEO Bob Dudley, an American expatriate, said his company is working with European oil and natural gas companies to develop a uniform industrywide message on reducing carbon emissions.

All three executives said they can fight climate change and generate shareholder value. They are not practicing altruism but demonstrating entrepreneurship by identifying a problem and offering a solution.

Total, Statoil, BP, Rome-based Eni Spa and Royal Dutch Shell have huge natural gas reserves in offshore Africa, Southeast Asia and Latin America. Chevron, Exxon Mobil and many smaller exploration companies have developed tremendous gas reserves in North America and the Gulf of Mexico.

The key to making money from much of this gas, including cheap American gas, is liquefying it for delivery to power plants, which is expensive. Historically high natural gas prices in Asia and Europe have convinced companies in Australia and the United States, including Houston-based Cheniere Energy, to build LNG plants that could add more than 86 million tons of LNG a year to a global market that only traded 243 million last year, according to industry reports.

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That new capacity could create a global LNG glut at a time when demand for natural gas is already soft. Delivering U.S. LNG to Asia costs about $10 per million British thermal units, but current prices are only about $11, leaving little room for profit.

“There is an oversupplied market and there is plenty of LNG to go around,” said Andree Stracke, chief commercial officer of RWE Supply and Trading, a European energy trader.

Shigeru Muraki, vice chairman of Tokyo Gas, told CERAWeek that demand from Japan, one of the largest importers, will plummet as 24 currently idle nuclear power plants restart over the next four to six years. New natural gas pipelines from Central Asia to China also will diminish LNG demand in Asia, he added. “It is a buyer’s market,” Muraki said.

LNG producers want to avoid a glut by convincing policymakers that less polluting gas should displace coal, the most polluting of fossil fuels. Hence the decision to embrace climate change rules that would drive up the cost of using coal.

The United Kingdom’s decision to phase out coal-fired power plants by 2025 will boost gas use there, but the recent restarts of coal plants in Japan and Germany have heightened competition.

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Meanwhile, too many U.S. executives have cozied up to climate change deniers on the fringe of the Republican Party, such as Texas’ Sen. Ted Cruz. Conservatives are fighting President Barack Obama’s Clean Power Plan and other climate change regulations that would make financing new coal-fired power plants almost impossible.

“Our plan lines up with the global trend to a low-carbon future,” EPA Administrator Gina McCarthy told energy executives Thursday. But, she added, “what makes environmental sense can make economic sense.”

Why Texas politicians want to protect Wyoming coal producers at the expense of Texas natural gas companies boggles the mind. But that’s because conservatives are focused on feuding in Washington, while European executives are worried about winning negotiations at the U.N. Conference on Climate Change this November in Paris.

A universal, legally binding commitment to cutting carbon emissions would be a big boost for natural gas.

“Natural gas is going to be a huge linchpin of energy infrastructure in the world,” said Rich Kinder, CEO of Houston-based Kinder Morgan. “I think North America will play a very big role in the LNG market.”

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Kinder complained to journalists that the energy industry doesn’t get enough credit for keeping the world powered, adding that energy executives behave as if they are “manufacturing cigarettes.”

What Kinder doesn’t appreciate is that for many people, the present emission levels of carbon dioxide are akin to the planet smoking a pack of cigarettes a day. As long as U.S. energy companies fight carbon limits, they will be about as popular as tobacco companies.

European executives are crafting a business plan where energy companies can make money and mitigate climate change at the same time. U.S. companies need to acknowledge climate science and create a new kind of energy business that generates power and contributes to a healthy future.

Chris Tomlinson is the Houston Chronicle’s business columnist.

chris.tomlinson@ chron.com