Energy security, net zero and the role of industry

Sir Robin Niblett KCMG

So, ladies and gentlemen, welcome to Chatham House. Those of you who’ve joined us here physically in the building and those of us – those of you joining us virtually, delighted to have you all with us today for one of the most complex and difficult conversations that I think – and research issues, I might add, as well, that Chatham House is grappling with, about the future of energy security, alongside the journey to net zero, and importantly, the role of industry in helping us achieve and get to those – a balance between those two critical objectives.

I’m Robin Niblett, Director of Chatham House, as most of you know, but, as I’ve said, for those online, welcome to us as well. We have an hour for this conversion. We have a reception afterwards, so, just to remind you, please do stay on for that if you want, up in the Neill Malcolm Room, where we’ll have a chance to continue the conversation.

This meeting is on the record. We’ll have a conversation for roughly half an hour on the stage here between us, I’ll do the introductions in a minute, and then we will take questions from you as well. So, make sure you’ve got your ideas and your thoughts and your questions ready to go. I would add as well, for those joining us online, please put your questions into the Q&A function and they’ll pop up here on the screen, and either I’ll be able to ask them. I think we’ll also have the capacity to be able to bring you in and, so, you can ask your questions live as well, which would be ideal, to be able to hear your voices joining us in the event as well.

As I said, we’re at a moment where energy is absolutely the top of the global agenda. We have very high prices, even by historical standards, even allowing for historical interpretations of inflation. We have immediate real threats to energy security for those importing countries around the world, not just here in Europe, but around the world, given the changes in pricing. Somebody said to me the other day that they felt that European energy had moved from an East/West geopolitical question to a West/East one potentially, and we’re seeing, with this moment of the NATO Summit, a lot of European governments suddenly saying, “You know, maybe that – those energy imports of liquefied natural gas from the US aren’t such a bad idea after all.” When Donald Trump proposed it a few years ago, people were highly sceptical. Now suddenly it’s a way of connecting up to a trusted source, and the views of Russia as a trusted source obviously have completely changed and, we might say, ended.

But what we want to be able to get into today is not just the energy security questions, but those as well connected to the new technologies, the roles of renewables, the way, in particular, the industry and companies are adjusting, both international companies involved in energy supply and production, but also the role of some of the big national producers of energy. And to achieve that conversation we’ve got a fantastic mix of participants here.

I’ll introduce them. Heading left, Claudio Descalzi, who I’m delighted to welcome back to Chatham House, who I’ve had the pleasure of sharing the stage with, on a few occasions in the past, the CEO of Eni, ENI, Italy’s and one of the world’s leading energy companies. He’s been the CEO since 2014, he’s a member of the General Council of Confindustria, which is the main Italian energy – sorry, industrial business community, and a member of the National Petroleum Council as well. But somebody who has been at the forefront of both global energy security, obviously Italy’s role within that, but somebody who’s got very good – an international sense of how the markets are going as well. And played a leading role, amongst other European energy companies, in redefining their position towards the goals of net zero and the energy transition.

We have Tania Kumar, who’s the Head of Decarbonisation at the Confederation of British Industry, and leads all of their work and brings together the British industry’s approach to the energy transition, right from achieving renewable capacity, the built environment, infrastructure, and obviously how this fits into climate. And keeps a close eye on where the British policy debate is going on this as well, and how it is creating the context, or not, for British companies to make their adjustment and be able to read the runes of very different messaging that you get from governments these days.

And then Dr Bassam Fattouh. Bassam, welcome to Chatham House. He’s the Director of the Oxford Institute for Energy Studies, also a Professor at SOAS, School for Oriental and African Studies. He is a specialist, in particular, on oil pricing, OPEC behaviour, some of the big national oil companies’ drivers as well, and the relationship, in a way, between OPEC and the market. Obviously, as we think about the role of international oil companies, national oil companies, suddenly we’re looking at those markets with a very different light to the ones we were literally just six months ago. So, Bassam, delighted to have you as part of the conversation as well, ‘cause obviously industry’s change is not just a question of international energy companies, but also the choices made by some of the large state-owned ones as well.

And what I’m going to do is just open up some questions, as I said, and have the conversation. Claudio, I’m going to start with you, with the very big question, which is whether Russia’s invasion of Ukraine and the impact it’s had on energy markets, in particular on perceptions of energy insecurity, has that completely changed the environment for your company in the demands of the market, the demands of customers, the expectations of governments? Can you manage the road to net zero and the new demands of energy security simultaneously? How is Eni thinking about this massive challenge?

Claudio Descalzi

And, first of all, thank you, and good afternoon to all Chatham House member, and thank you, Robin, for hosting this event. So, the question really – so the energy security issue is a big issue now, but was also a big issue before the war, ‘cause after – in the second part of – second half of 2021, prices, oil and gas prices start going up, and at a very high level. Now with the war, the situation is worse. Clearly, we have different kind of impact on the energy system, especially, you know, electricity, so, very high costs, so, that is a very important input from a social point of view. So, all the political system, all the institutions now have to – they are, they found, they tried to find a way to help the society and the industries, because all the industry that use a lot of gas, like our industry, chemicals or refineries or other industry, are suffering, and a lot of industry are shutting down and they’re not able to sustain this level of prices.

So, they – we have a problem of price, but we have a problem – also possible problem with volume, because after eight years of very low investment, so, in the last seven, eight years we had a average of 50% of the – less of the investment we had on the previous ten decade. So, we have a issue, in terms of, if we are able to find the energy that we need before the war. Now, with the Ukraine war, the issue is even more important, because if you remove a practically, a call that is coming from Russia, a removal, so most, 90% of oil that Europe take from Russia, and now we have about 50% less of gas coming from Russia.

The situation is not easy. So, Europe now, Europe is a big market, but we know very well that there is no domestic production, or it’s very low. We have about 140 million cubic metre. I talk about gas, the gas is more – the most important part, about 140 million of cubic metre per day of gas for domestic production, and the remaining is, 1oo million is coming from Russia now, so, because it’s very low. Before it was 150/160 million gas – cubic metre per day. A big part is coming from LNG, so, you were talking about Trump and LNG, now the energy from US is helping Europe. We import overall, not from, just from US, but about 340 million cubic metre per day, and that is helping.

And then we have pipe from the South, and the big contribution is from Norway. Norway is giving to Europe about 340 million cubic metre per day. So, overall, what is happening now is that we have a demand of gas of about 700 million cubic metre per day, and a supply of one billion and something. So, at the moment we have, we can say, an oversupply, because we are in the summertime and the excess gas, excess from demand and supply, what we have to do, what we try to is do inject in storage, we – so, because the aim is to get it – or, by October, to have a storage at 80/85%, because we need that during the wintertime.

So, the situation is, what is the portion out of this one billion for Europe, more than one billion of supply, Russia represent now 100 million, so, 10% overall, considering all the different countries. Is a problem, because also we need it to fill our storage facilities. Then Europe is not under the same kind of condition, is not – the energy mix of Europe is very different, country-from-country. In France we have 70% of nuclear, just is more, depends from gas from Russia. In North Sea we have wind, that is very strong. We have, in Germany, coal, powerplant, in UK you are practically self-sufficient, you have LNG, you have nuclear, you have coal, if you need, in any case, but it’s better not to use it.

In the South of Europe it’s completely rely, South of Europe, on renewables and gas, and for Italy, we have the – for Spain , but especially for Italy, we have the chance that we started our diversification a long time ago. So, we have the pipe from Algeria, pipe from Libya, we have a pipe from – a tap from Azerbaijan, then we have LNG from Egypt, LNG from Nigeria, from Angola, and in the future from Congo. Mozambique started a coal project, started production just a few – one or two months ago.

So, we have a diversify sources of energy for gas. So, Europe is not in the same condition, and that is good and not good, because sometimes, you know, there is the diverging objectives, and we need in this time to be really link. We have good, in Europe, good storage facility, in Italy, Germany, France, Holland, so we can really rely on these storage facilities. Now we have to diversify, because we have to consider that maybe in a few months, in one year, I don’t know when, it depend on the war, we cannot – Russia can stop production, or we can have sanction and we cannot get this gas.

So, all Europe now is building a diversification, in term of gas, first, an acceleration, in term of renewables, that is clear, but the geographical fit is quite different in Europe. So, the South Europe is good for soltech, for solar, but the wind is better in the North, so, there is an acceleration. But clearly, we have to consider a different kind of energy mix, because we can’t rely only on one source of energy. We can’t rely just on renewables, that is clear. So, we need gas, we need a lot of circular economy, we need biofuel, that is clearly. We need hydrogen, but hydrogen is not a primary source, you have to produce hydrogen. It’s not like gas, oil, coal, that you find it.

So I think that diversification, in term of technology, diversification, in term of geographies, that is a key issue for Europe, to become independent from Russian gas, so, that is a priority.

Sir Robin Niblett KCMG

And thank you very much, and what we’ll do is we’ll come back in a minute to the conversation about the different – maybe some of the different geographies, and some of the different technologies, and in particular, from the European perspective, the interconnections. But that’s a very helpful opening set.

Tania, let me turn to you. From a British perspective in particular, a government which is – all governments recently have put a huge emphasis on the climate transition, on trying to hit some pretty stringent targets that are now written into law in the United Kingdom. How do you see the big questions? Suddenly the government’s all about energy security, price, a fear that this price obviously is driving inflationary pressures, as Claudio was saying, both for industry and for consumers, both in electricity and importantly in transport as well. How are your members adjusting to this environment, is it suddenly having to flip away from the transition part and into just getting enough supply? Where is the effort going, or is it an acceleration to the transition, what’s your take across the CBI?

Tania Kumar

Thank you, and I think it’s a great point on this. What we’ve seen, as Claudio mentioned, is not – this isn’t something coming out of nowhere, particularly for the UK, right? If we take a look at the last year, for instance, we’ve had a whole set of events. So, coming out of the pandemic, for instance, that’s obviously sent shockwaves, industry restarting. We then, for the UK, you know, we had the, this time last year, we had the G7 Presidency as well, and we were doing the run-up into COP26.

We had the UK only just last year publish its net zero strategy. We also had the Treasury as well, here in the UK, publish its, sort of, net zero review of, sort of, how does policy account for net zero? And then at the same time as, you know, just before COP, we had this issue across Europe around high energy prices. So, this was already occurring for us on the Continent before, sadly, the war in Ukraine began, so, we were already seeing this be reflected.

And that also showed to us the interconnected nature that we were seeing, you know, post-pandemic reopening of economies globally, and energy being a core part of that. Alongside, you know, other things such as, you know, logistics, transportation of goods, we have things, well, you know, all over globally. So, this has been at the heart for UK industry, rallying up into, sort of, the G7, to COP26, coming out and, you know, as a country, trying to lead the way on NDCs and the huge role that business and industry has to play as part of that.

So, one of the biggest reflections, as someone representing UK, you know, industry at that summit was, you know, UK industry had never gone to a COP summit before, for instance, and was making their mark to tell, you know, the rest of the international business community that this is the way forward, that there is growth in green technologies, and the path out of the pandemic and recovery has to be investments in the transition.

So, to your question, all of these, you know, opportunities of green markets were being created like never before, right? So, you’re seeing all of these entrepreneurs, the likes of Bill Gates, you know, bringing out his book on, you know, “This is where we need to be investing.” You’re seeing that huge growth in capital, and you went from seeing the talk of, you know, of billions for the transition, into trillions. Now, that is big, you know, for a lot of people it’s, you know, “What does that actually mean realistically, when we come down to it?”

But now, what the issue is now is, with energy security, you’ve obviously seen a rapid increase in investment in renewables across the world globally, but particularly in Europe, and we’re looking at, as Claudio pointed out, you’ve suddenly had Europe, obviously with their Fit for 55 package also coming out; this real, sort of, sharp focus on, “We need to accelerate investment,” and that’s been a moment for the UK to say, you know, globally, “Yes, you know, we have made some of these investments.” So, our investments in offshore wind, mechanisms like the Contract for Difference mechanism that was created, that was good policymaking that’s come forward, and it’s reaped rewards now.

The challenge for the UK is to do some of that policymaking, but in a much faster way, to deliver. And today, many of you will have seen our climate change committee in the UK, one of the great pieces of institutional architecture that we have as a result of the Climate Change Act, has today given an assessment on the first – you know, our annual assessment of performance. It has been pretty scathing of the last year, but also accounting for the fact that a lot of dynamics have changed in the space of merely months, no-one could have forecast what was going to occur.

The challenge is, you know, there’s a huge part to it. One part is obviously the supply side, but the second part that’s missing in policy is the demand-side aspect. And looking forward into the transition, there is going to have to be this balance between both supply and demand-side policies, and we haven’t seen enough of that as yet.

One of the big reflections that we’ve seen in the last, sort of, six months and slightly longer, is that acute understanding of, there has to also be changes in demand. But also understanding of, sort of, industrial demand as well, and I’m sure we’re going to discuss it, but that’s the other aspect, sort of, understanding energy contracts, who uses what energy. That’s also something today that’s come out in the committee’s report today, that there isn’t enough information on actually, how do we use energy on an industrial level?

But also there’s a lot of co-dependencies, like we saw, you know, the issues with fertilisers at the beginning of the year as well. So, that’s something that we’re going to have to, you know, change policymaking as well, to account for those interdependencies, because the energy transition is fundamentally looking at synergies across the whole system, and that’s something we haven’t got in, sort of, policymaking across the piece, but diversity is the key. You can’t rely on just one source, and that’s where, sort of, the UK’s net zero strategy has done well, and the follow-on recently. We’ve had an energy security strategy as well, that looks not just at one technology, you’re going to need many technologies, right, to basically balance your baseload, and account for some of these changes, these exogenous shocks that we will not be able to predict either, to get that flexibility.

So, at the moment there’s, you know, a few things between, sort of, security, flexibility, affordability, which we’re all contending with.

Sir Robin Niblett KCMG

I’m wondering whether we’ll need to maybe come back to in a minute, are we living in an era, or are we moving to an era, I know it’s a very difficult thing to predict, of consistently high-price fossil fuel, because of the lack of investment, Claudio, you mentioned a second ago, and then the very rapid, all-of-the-above response that is coming now to try and mix net zero with energy security? So, maybe we can come back to it in a minute, and whether that higher price for traditional fossil fuels is acting as a disincentive to some of the transition, or actually more of an incentive, because obviously the pricing’s at a level where industrial producers as well as consumers are suffering, in terms of their inputs and what they can do.

But, Bassam, let me bring you in first for a chance to talk about how you think the energy security profile that – of the world that we’re seeing today has changed the picture for the transition to net zero. How do you see it, from where you’re sitting, with this more, if I may say, global perspective? It may be as global as everyone else’s, but I know you can bring some particular angles in how other producers are thinking about it. Over to you.

Bassam Fattouh

Thank you, Robin, for the kind invitation, and I’m delighted to be joining this panel. I will pick on couple of points that Claudio mentioned. The first one is energy security and lack of investment, and then I perhaps say a few words on demand as well.

I think certainly the energy and security dimension has been elevated in energy policy. I think for a long period of time policymakers were living in a benign environment. High growth rate, low inflation, low interest rates, globalisation, abundance of fuel and cheap, also, cheap energy. And I think as a result of all of these factors, energy security seems somehow that it fell in the priority of their policy agenda. And I think the Russia-Ukraine war has changed all of this, and I think now there is a realisation that when we talk about energy policy, and it has always been the case, that it’s not unidimensional, and we have to talk about sustainability, we have to talk about energy security, we have to talk about affordability, even in developed countries, because high energy prices affect consumers, and especially low-income households.

And also, there is another very important dimension that when it comes to emerging economies, is that energy is very important for their development as well. And I think the fact that we are dealing now with all of these dimensions is making energy policy quite complex, and of course, there are likely to be trade-offs, at least in the short-term, and we’re already seeing some of these trade-offs. For instance, in Europe we are seeing increasing reliance on coal in order to optimise the use of gas, but I think this also has an international dimension, because energy is very much interconnected.

The fact, for instance, that Europe is competing in the gas markets is actually increasing the gas prices for other countries in the world, and this is going to impact their affordability and their energy transition paths, and actually, this is not only limited to gas, as well it’s also to coal, because European are also competing in the coal market, and even increasing the price of coal. So, I think, you know, it’s quite important and, you know, one of the interesting and important development is that energy policy is now back where it should be, where we’re dealing with a lot of trade-offs and we’re dealing with a lot of complexities.

The other point that I would also like to emphasise, and Claudio mentioned that, is that, you know, at the end of the day, the demand for oil and gas continues to rise, and at the same time, what we are seeing is the lack of investment on those traditional consumer – traditional fuels that consumers are still demanding. At the same time, we haven’t scaled up the alternative technologies that are needed there for that transition, and this is, basically is going to create gaps, and this idea that the energy transition is going to proceed smoothly without any setback, I think that’s really a myth, you know, and, you know, we are seeing some of those gaps, and those gaps are quite serious, and how do they manifest themselves? They manifest themselves in different ways, you know, high energy cost, inflation, loss of competitiveness in certain regions.

And, you know, that basically raises the question whether those factors, low affordability – actually, is this good for the energy transition, you know, is the fact that, you know, we’re seeing incomes being squeezed, is that actually good for the energy transition? Also what we – what worries me as well is the government intervention in responding to this financial crisis, because, you know, we’re hearing a lot of ideas like to intervene in the market, try to impose windfall taxes, try to introduce some of the ideas like the price caps and things like this. And the question is, will these policies really accelerate energy transition 0r not? So, this is actually one aspect…

Sir Robin Niblett KCMG

Do you think – you’re asking the question. Do you think they don’t, or they would?

Bassam Fattouh

I personally think that some of these policies actually could delay that transition, or at least, you know, provide a setback and some of the policies that we hear about, I think they’re not necessarily quite useful in the current context. And what worries me is that, you know, we always think about net zero, that we all want to get to that world, but the way we get there also matters. You know, that is quite an important point, because this is going to be a long process, and if you are getting there in a disorderly way, it’s likely to alter the, you know, the transition path that we are thinking of. You know, think about political setbacks, think about government intervention, so, it’s quite important, you know, to look at that aspect.

The final point that I would like to make as well is that there has been a lot of focus on the supply side, on how to diversify fuels, but I don’t think there has been much attention to the consumer side. We really need to think about the consumer behaviour, because if you want an accelerated energy transition, consumer behaviours need to change, and the question is, are consumers’ behaviour changing fast enough to ensure an accelerated energy transition? And I have to say, you know, the experience that we witnessed after COVID and the rapid rebound in demand, you know, raises a lot of question about consumer behaviour, but more generally, about their willingness to adopt new technologies, basically, willingness to pay higher prices. All of these are key uncertainties, and I think, at least in my view, the debate is so much focussed on the supply side, you know, what is it that the industry can do, what is it the supply side can do? And, I think, less attention is given to the consumer side, and one can understand because, you know, dealing with consumers politically is much more difficult. But I think, you know, one cannot escape the fact that, you know, this is a transition has to be driven both from the supply side and the demand side, and consumer behaviour.

Sir Robin Niblett KCMG

Look, maybe the price impact may have the impact on consumer behaviour, as we’re seeing already, that the lack of government policy hadn’t.

Let me just do another quick round, and then please do have questions ready to share with us in a minute. Claudio, we didn’t talk as much about the renewable energy mix. I’d be fascinated to know what a company like ENI – Eni is doing right now, to change that mix. Where are you putting the heaviest emphasis for the company, how are you, in a way, offering different options for consumers, so that actually they can make different choices? Is it up to a company, can a company make the difference, or is it, you know, across a number of companies, along with government regulation?

But could you just talk about the main areas of emphasis at the moment? Because otherwise, I suppose, you know, the danger is that with this latest crisis, we may end up baking in an all-of-the-above approach that, sort of, creates a very messy transition, in which aspects of high-priced oil and gas are stuck inside what would otherwise have been maybe a slightly smoother transition. Just say a word or two about what ENI’s doing on the renewable side and which areas you think are most promising.

Claudio Descalzi

Just before talking about what we are doing, just in connection with what Bassam said, so, the demand. I really think that the last three years, especially during the COVID where the demand – where demand was very low, and also the year before, 18/19, people spent a lot of time talking just about future. Is correct, talking about future, but at the end, we thought to be ready in 2040/2050, and when after COVID we wake up, we have a wake-up call, the demand got back again at the same level, or 82% of coal, hydrocarbons, we understood that we never talk about the present, so, the present time.

And when we talk about transition, you know, is – the issue is that we used, or the institution, all Politician used, you know, technology from an ideological point of view. In Europe, big discussion and debate for years talking about CCS, so, the carbon capture. UK was very fast, in 12 months changed the regulation and create the investment. We are, I think, one of the first, now, investors in UK in CCS, in Liverpool Bay and in the future in the South East, in [inaudible – 36:59].

But we – so, there is a debate on technology, from a political point of view. There is not a debate on the demand, and I think that is correct, as the institutions and Politician give us the target, that they can decide which kind of technology you have to use, or say, “This technology is good, that technology’s not good.” So, I think that this kind of debate, that is a democratic debate, is correct, but is slowing down, and slowing down all the processes. Who’s suffering? Industries, because they don’t understand what to do. If you want to change the demand, you have to change all the processes. If you want to use hydrogen or green – blue or green hydrogen, you have to change your pipes, valve, links, because the molecule is so small. If you use the same kind of infrastructure, the hydrogen disappear and is quite dangerous.

And the oil-wise, you have to change your processes, ammonia and the refineries are ready, because we use hydrogen; other processes are not. So, I think that we talk about the future, we talk about the future fuels without investing, without studying, without competencies. Why? Because the energy issue was not an issue for 20 years, because we got energy from everywhere, and Europe has not a security energy plan, nobody has a security energy plan, and now everybody became an energy expert, like, in COVID, everybody was COVID experts.

So, I think that this kind of approach can create some lack of efficiency and effectiveness, and somebody has to pay when there is inefficient and you talk without knowing what you’re talking about, somebody is paying the bill. So that is an issue of a rich, big market, Europe, within to be rich – Europe is big, big market, no energy, like, a Ferrari without gasoline, you can push. Somebody is driving, but he’s going very low.

So, I think that what we have done, first of all, seven, eight years ago we tried to find a geographical diversification, because mass – most of our gas was coming from, you know, the direction was North, East, West, Russia and North, Norway, North, South. So, Europe decide to have just two sources, so, what we did is diversification in the South sides, because we forgot completely the South of Europe. The South of Europe is not connected, really connected with the Central/North Europe. Spain has a small pipe, I don’t know, five or ten billion cubic metre per year, nothing, and Spain has a larger storage – sorry, regasification plant in Europe, that are not idle, but they cannot give the night – the right support to Europe.

And Italy also has a very small connection in reverse flow to give gas to Europe, so, what we did is, first of all, increase pipe from the South. That is quite important, because in Africa you need investment, they have a lot of energy, they don’t produce CO2, they don’t have access to energy, at least 600 million people in the Sub-Saharan Africa, and they have the opposite problem. So, I think that the geographical diversification, investing in Africa, so, a strong diversification that can help the developing Africa is essential and what we did. We did it in a different way, because we start developing gas, so, our company explore lots of gas instead of oil, so, we discover a lot of gas in Africa. Now we have about, in terms of reserves, 50 TCF. That is a huge amount of gas, our equity.

In Algeria, in Libya, Egypt, Nigeria, Congo, Angola and Mozambique, that are the main area where we develop gas, we started a long time ago. The first step was to develop gas for Africa, so, 75% of the gas that we develop, about 65 billion cubic metre per year, is for domestic market. In ten countries we give 100% of the gas to the domestic market, and we have done to pass from coal to gas, because the alternative to coal is gas, and vice versa.

So, this was a first step. Then, seven years ago, when the price went down, we felt that the volatility and the crisis of the hydrocarbon system, [inaudible – 42:21] push us to thought not just about a geographical diversification, Africa, Middle East, Asia, but also a technological diversification. So, we develop a lot of preparatory technologies. We have about 7,500 patents. On these patents we develop 480 projects based on different area. First of all is biofuel, so, biofuel, on our technology, we transform. We’ve been the first to transform a transitional refinery in a biorefineries, means, a refinery that use bioproducts, so, agriculture, but not in conflict with food, but especially waste material, organic waste material. Primary, secondary and special ones, so, cooking oils or animal fats, so, we use that to produce biofuel. Also bio jet fuel for aviation. We were discussing before, you were scared about that, but you can. It’s better that, that an electrical plane and it’s better to use jet fuel of bio – from a biorefinery.

So that was then circular economy to transform the infra – in chemical especially, polymer, by a – from the mechanical point of view and also chemical point of view, 80% of all the polymer we transform in monomer, and again in polymer, so, that is quite important, and this is our own technology. Other technology in chemical to transform plasmic, so, complex polymer that you cannot burn, you can use to energy because it’s not – you’re not able to transform in monomer. So, with the gasification, from that you can get hydrogen. It’s not blue, it’s not green, there’s no grey, but it’s coming from chemicals. The pink, we can call it, but it is not pink, I’m joking, but it is a different kind of hydrogen.

And then, we have renewables. Renewables, we increased very, very, very rapidly, from zero, we for – we establish a company in 2015. Now we have two giga, more or less, we have to reach 6GW, 6GW by 2025, and more than 15 by 2030, especially in Europe. But going back, and I finish, going back to the first question, demand, how you can change the demand? How you can attack the three scopes, scope 1 and 2, that is due to our production, and scope 3, that is the CO2 that we produce when we use gas or other, kind of, also in the mobility.

So, our strategy was really to take the responsibility, and not just for the scope 1 and 2, we decide that in 2018, but also for the scope 3. So, I sell gas to you, I sell electricity to you, I cannot ask you to decarbonise your – how you can do? So, how you can change the demand? You cannot give to the consumers their responsibility to change the demand, they don’t have the technology.

So, our responsibility is to sell decarbonised products, can be green, can be blue, can be bio, but decarbonised product. So, what we did is to work on our technology in the last seven years to be able to create processes, transformation processes to sell decarbonised products. For that reason we create a company. Clearly, as the oil and gas company, we are in quite a peculiar situation. We have more than ten million customer in retail oil and gas, so, we work to sell green electricity. For that reason we grow – we grew a lot on renewable, green electricity, and then in the next dec – in one decade, to sell biogas, biomethane.

From the mobility point of view, we have 1.5 million customer, everydays, so, we sell biofuel, we sell green, or green now is quite expensive, but blue hydrogen. We have already a station with hydrogen, and we’re going to open the second. There is no car, but we open a station, so, we’ll see if that will work, but we sell electricity clear. We have more than 80,600 points, so, the issue is, we have to produce clean product to our clients. In this way, you can change the demand, but if you are passing your time talking about how you can do supply, and you forget about demand, and you don’t do anything for the scope 3, the loop is not closed So, I think that is important.

But the second aspect is also to have institutions, leadership that can follow or, you know, say, before you and in front of you, to create the right kind of norms and law and to be able to sell your product. Because if you are projecting new technology, new products, but the system, regulatory system is not trading, you produce something that you cannot sell. So, I think that the connection between institution, that is working very well in UK, the institutions, and the new technology providers, the company, they want – must be close, and no ideology on the technology, nobody – and if you say you have to be at zero by 2030, it’s 50 for – I have to – you cannot tell me which kind of technology. How you can know that? It’s impossible.

Sir Robin Niblett KCMG

But, I mean, the EU has tried to get itself through that, partially through its whole sense of what constitutes a green product and what doesn’t, its taxonomy, as it’s called. But you mention there, Claudio, the importance of this and, Tania, again, just to finish up the round and then get the questions in, I’ve got a few as well online, just be ready, folks online, we may unmute you, so you can ask your questions. Tania, do you think the UK Government is providing that regulatory clarity, and is it having an accelerating effect, therefore for renewables to get into the market, or, are we already behind the curve? You said the climate report was scathing, so, if one of the countries with the clearest regulatory track is being highly criticised, what’s going wrong and what are we missing and, you know, what’s the criticism?

Tania Kumar

I mean, it’s a great question. The key issue is obviously the delivery challenge as well, because, to Claudio’s point, you know, for industry to come forward with, you know, acceleration of these plans, it just cannot, it’s not flicking the switch, it’s not on/off. To scale up offshore wind or to bring onshore wind, we’ve got, you know, policy processes in place, which add to those timelines. Same with the development of hydrogen, the recent security strategy looks at doubling a target that was set last year, and we still haven’t got the business models developed to show industry where the policy certainty is going to be.

So, it becomes a question of also risk management, right, that, you know, where do you get this balance between public sector investment and private sector investment, and there is no word of a doubt that obviously private sector investment is going to drive through the innovation but, to Claudio’s point, again, and to Bassam’s point as well, you need that policy certainty, that regulation, that confidence that if you’re going to invest, that policy environment is not going to change. And that’s where there is also a little bit of, you know, confidence in, sort of, UK policymaking as well, that at least you’ve got all political parties very dead-set on delivery of the net zero strategy. The path may – pathways look slightly different, you know, everyone wants to, sort of, accelerate in different aspects, but again, you come up against this demand challenge as well.

Sir Robin Niblett KCMG

There’s energy – there’s the government’s new emphasis on energy security, its requirement to maybe reopen coal plants, or reissue licences for North Sea exploration and production. Is that a change in the policy environment that is not welcome by industry, or is that understandable and does not affect the investment in renewables at the same time?

Tania Kumar

So, looking at – we always had some, sort of, baseline level of gas as a transition as well, and we’re looking at, if you look at the North Sea for instance, moving to the next stage, the CCUS technologies, the electrification of those platforms, also showing the art of the possible in the transition for North Sea, it’s actually quite significant globally. So, there is a balancing act, as Bassam alluded to as well, there will be, sort of, a short-term trade-off, but it does not negate that energy security is – has only added emphasis to why you need the energy transition even more so for affordability and security and flexibility for these other challenges.

But amidst all of this, obviously there are many challenges that industry are contending with, right? So, if we look at wider inflationary pressures, as well, but again, that is where the role of the government to, sort of, get behind industry, to take on that risk and say, “We are there to, sort of, support” becomes really important. No word of a doubt, there is a lot of capital out there. One of the biggest issue is that the capital doesn’t have projects to go into, that’s what we hear, and that’s where you need both sides of, you know, all government, and also different parts of industry coming together.

Sir Robin Niblett KCMG

And just one more question to Bassam, and then I’m coming to the floor. If I could take advantage of your knowledge, let’s say, of some of the very traditional producers in OPEC, do they see themselves as the, kind of last countries standing, that they’re expecting the transition ultimately to filter through in Europe, maybe in the US at some point, but certainly in Europe and other countries, and they see an opportunity for themselves to remain producers in the oil and gas market? Can they meet the energy security push that’s happening right now, or are they themselves investing less and less in the future, because they don’t have a sense of the predictability? Have they bought into the projections that were done in the Glasgow Compact?

Bassam Fattouh

I’ll come to your question, Robin, but let me just follow-up on this idea of the scaling-up, because that’s what we are talking about, you know, scaling up some of the technologies that are needed for the energy transition. And there is no doubt that the private sector is going to play a very important role in scaling up these technologies, but what we really need, you know, as we emphasise, is a good regulatory framework. You know, what is so special about this energy transition? Because energy tran – you know, the energy system has always been transitioning, but what we’re trying to do is transform the energy transition – sorry, the energy system in a very accelerated way, and we’re trying to move away from efficient fuels, quite reliable fuels, and that actually requires public policy.

That’s why I see that, you know, regulatory environments, public policy are quite important to enable some of these technologies. And I have to say, I find the international energy companies in a very difficult position, because they are generating a lot of cashflows. If they invest a lot of these cashflows in their existing technologies, which is still demand for, you know, they might be penalised by markets and investors. And if, you know, you try to push them into the new technologies, but those, the business models and the regulatory environment is not mature enough to direct a lot of funds into those, and in the background, you have the government is saying that if you return a lot of money to the shareholders, we going to impose a windfall tax. So, you know, I don’t envy you, you know, Claudio, to be in that position.

Now, back to the producers’ point. I think you raise quite an important point about the behaviour of the producers, because I think there’s a narrative out there, is that the producers are going to be the losers of the energy transition, and the narrative goes such as this. “Oil demand’s going to decline, there’s going to be a lot of competition between producers, and that is going to lower revenues and lower rents, and given the fact that the producers are highly reliant on oil revenues, they’re going to be subject to social disruption, political disruptions and all of that, and as a result they’re going to be losers from the energy transition.

I find this type of analysis actually completely simplistic and quite deterministic, and for a number of reasons, related to the question that you mentioned. First of all, one needs to think that, you know, those – when we talk about exporters, we’re not talking about a homogeneous group of producers. Some of them are in much better positions to deal with the energy transition than others. So, we cannot, you know, group all producers in the same basket.

The second is that they have some core competencies in the current – in the future technologies, if you think about hydrogen, ammonia, if you think about renewables.

The third point is that they can benefit from the dislocations that we discussed before, because at points when there is lack of investment in the traditional fuels, and if demand continues to increase, actually they can benefit a lot of those – from those trends.

And the final point, which is directly related to your question, is that those companies are not standing still, you know, they are actually investing in traditional fuels and increasing gas productive capacity, and oil productive capacity, but they are also looking at other opportunities. They’re looking into green hydrogen, they’re looking into blue hydrogen, they’re looking at CCS, and I believe that some of those countries have the ability actually to compete on all of these fronts. So, this idea that, you know, all the producers are going to be losers from the energy transition, and they are not changing enough, and they’re not embracing the energy transition, I think really this is not the reality on the ground.

Sir Robin Niblett KCMG

Thank you very much. Let me get some questions in, and I see lots of hands going up. I’ve got a couple of questions and I’ll bring in live. I’ve got one question, at least that I know the person wants me to ask on their behalf. Olivier, I will ask your question on your behalf, but maybe, Trisha, we’ll get your question live, if we can, and there’s a comment by John Sproule, which I will relay in a minute.

But let me take a couple of questions in the room first. So, you know, you always get to ask a question, so, hold on one second. One, two, three. One there, and I’ll keep a track of them. Yeah, please, go ahead. Yeah, I’m keeping track. Yeah, you’re first, just go ahead. Don’t worry, it will pick you up.

Member

Okay, thank you very much, and thanks very much for the insightful comments that you made, and some of the points have been covered. When you were bringing up the supply and demand, one question was going through my mind is the infrastructure on both sides, and another question that was going through my mind was that the Western economies are flattening out, and we know that McKinsey, 2030, most of the large cities…

Sir Robin Niblett KCMG

Didn’t hear the second bit, sorry.

Member

What I was saying is that the Western economies are flattening out, and McKinsey has already talked about the largest cities in the world coming in Africa in 2030, which is not that much time, yet we don’t have the infrastructures there to support it. And we know that energy is a very important part in the growth of the economy. At the same time we have the Silk Road coming through, and again, we have energy issues with high price rises there. So, when we just look at Europe and we don’t see then, the connectedness of the various global markets, and the lack of infrastructure, because even in Europe we see North and South, I think we’re making a problem. I don’t know what your thoughts are on that. Thank you very much.

Sir Robin Niblett KCMG

We’ll do an infrastructure question in a minute. Yeah, please, here.

Member

Yes, good evening. I attended the COP26 with a small delegation that included some of our local businesses, and what I was interested in was, the two stakeholders, which were really outstanding were not so much the Central Governments, but the business delegations and the local government and the Mayors, and the colleague who spoke just now alluded to cities. 60% of global emissions come from cities, so, reaching net zero is very much something that needs to be done at the local level. So, the question I’ve got for the panel is, what can be done to engage at the city level, and perhaps just to throw in that you may also know that the COP27 in Egypt will, for the first time, have a ministerial meeting of – on globalisation, which emphasises this key role of the city level on reaching net zero.

Sir Robin Niblett KCMG

Perfect, thank you very much. Yeah, please, question there, yeah.

Member

My question’s going to be short and straightforward. I must admit, I am not an expert on energy, Claudio. However, I’m a consumer. What I want to ask is, we’re all talking about fossil energy. Why have we not invested into solar energy, i.e., in North Africa, California, and other parts of the world?

Sir Robin Niblett KCMG

So, more into solar, and actually, that ties into a question we’ve got online here. Can you unmute, Trisha, is that unmutable? ‘Cause that ties in well. Can we hear you? One, two, three.

Trisha de Borchgrave

Yes, can you hear me?

Sir Robin Niblett KCMG

Yes, yeah, go ahead, please.

Trisha de Borchgrave

Well, and I do say in my question here, and do forgive my naivety upfront on this, but I don’t quite understand why the gentleman has said that the alternative to goal – to coal is gas, and not renewables, especially in Africa with its abundance of solar power. And I just wanted to ask you, is it just a given that gas is the required transition energy, is this a scientifically proven thing, is this a lack of baseload capacity? Why do you make that assumption, because I was, sort of, unaware of that, and again, forgive me if I’m a little naïve on this? Thank you.

Sir Robin Niblett KCMG

Thank you, we’ll get that one there. There are two questions there, lots of hands going up, and we’ve got very little time. So – ‘cause I’m just conscious of time, and I know what’ll happen, ‘cause I want to give you all a chance to ask questions, but I want to get lots in. So, I’m going to keep taking questions from the floor, I’m keeping track of them, and we’ll just – exactly, ‘cause it’ll be better that way. So, please go ahead, yeah.

Mustafa Sayed

Right, thank you. My name is Mustafa Sayed. I am a student of African and International Development at the University of Edinburgh. Just last month, we had the Ibrahim Governance Forum in London, where we talked about the road to COP27, because the COP27 is going to be a COP about Africa in Sharm El-Sheik, Egypt, so – and while the conversation was ongoing, two points became very, very noticeable.

The first one was Claudio talking about how there is an opportunity for investment when it comes to transition in Africa, that Africa presents an opportunity for transition, because of course, Africa has what the developed world has, and then perhaps the developed world also has what Africa needs; that’s finance, right?

But on the other hand, something very important that came up was the point made by Bassam about how we need to pay attention to the means to getting to the transition, to getting to the future. In the developed world, for example, you talked about the intervention, right, that’s taking place now. My question goes to Tania and Claudio, and it is that, what is the private sector doing to make sure that while you are making this investment in Africa towards the transition, that it’s not business as usual? That these investments aren’t going to perpetuate the kind of poverty that we have in Africa, for example? Because this is a constituency that is going to – that is 1.2 billion, so, in the future is going to be a lot of people. So, what are you doing to make sure that these investments do not compromise on the ability of Africans to afford their own transition while you’re trying to do so? Thank you.

Sir Robin Niblett KCMG

In future, thank you very much. Yeah, I’m conscious – so, exactly, yeah, I’m going to take two here, and then one here, and that’s it, yeah.

Adel Hamaizia

Adel Hamaizia, Associate Fellow here at Chatham House; thank you for a wonderful presentation. Claudio, two of the countries, which really have bolstered relations with recently in Algeria and Qatar. I was hoping you could just say a little bit about, when we’re thinking about something Tania mentioned on factoring in a baseline on gas, how are we thinking about long-term LNG contracts for Europe, Italy and UK where two of the largest importers from Qatar over the last year, and where that’s going?

And when thinking about regasification, which you mentioned, we saw what’s happening with Spain and Morocco today. Enrico Mattei in Algeria, we know, a very privileged position, what can North Africa offer, in terms of numbers, and from an Italian and – or British perspective, maybe Bassam wants to come in, just on…

Sir Robin Niblett KCMG

Just an Italian perspective.

Adel Hamaizia

You have a cold Italian in December who’s unemployed, how do you reconcile a price cap? How do you recon – and if the Russians don’t bump after NS1 maintenance, so, just your thoughts on the big picture question.

Claudio Descalzi

Price cap for gas or for oil? Sorry.

Adel Hamaizia

For gas.

Claudio Descalzi

For gas.

Sir Robin Niblett KCMG

Price caps for gas, right. I’m sorry, I’m going to be very disappointing, I’m going to take the last question here, because I know I’ve got lots of hands, but I’ve got – we do have a reception afterwards, and you’ll have a chance, those who I didn’t get in, to come back and get questions, but please, go ahead. Yeah.

Maria Sophia Kourti

Maria-Sophia Kourti, member of Chatham House. I wanted to ask actually, Claudio, I was intrigued and I would like to hear more about the technology that you are using to measure green energy output, and how you’re addressing scope 3.

Sir Robin Niblett KCMG

Yeah, did you get that one? I was concentrating on this, so, I didn’t write that one down, but hopefully you heard that question.

Maria Sophia Kourti

[Inaudible – 65:44] setting an example.

Sir Robin Niblett KCMG

Okay, alright, look, there are a huge amount of issues here. Let me just remind you all, the key ones, as I understood them. Questions about infrastructure in particular, and that tied into a lot of the questions around Africa. Are we building long-term…?

Claudio Descalzi

I can…

Sir Robin Niblett KCMG

Yeah, just do that one first, exactly.

Claudio Descalzi

I just try to answer…

Sir Robin Niblett KCMG

Yeah, why don’t you go into that, and I’ll pick up any others.

Claudio Descalzi

…to everybody, from my point of view, on the question that you mentioned me. So, first of all, I want to clarify the misunderstanding before. I was not saying that if there is no – if you don’t use coal you have to use gas. I was saying that in this – at this precise moment, if there is a lack of gas, what is happening? That the only thing at the moment, we have also renewable, but to give continuity, countries, some countries, they are using increasing coal because there is a gas-fired plant, and then coal-fired plant.

So, if they are replacing – country that they don’t have gas, they are replacing gas with coal. I’m not saying that we have to replace coal with – is the opposite side, is what is happening. Clearly, I – what we said, in the panel, that we have to select and seek for a different kind of energy mix. So, infrastructure is an issue that we didn’t discuss, but is one of the most important point also on the energy transition. Why we are slow to change? We are slow to change, because when we change from one energy vector to another energy vector, we have sometimes to change infrastructure, so, that is a big point.

And if we look at the history, coal is still the first – we’re not using coal and we’re not producing coal, just to be clear. I wouldn’t want to do that, but coal is still the first energy source for electricity worldwide, with 37%, and produce 72% of the emission, plus fine dust and other stuff. So, it’s very long, the transition, for infrastructure. The big issue in Africa, that’s why Africa is not able to use their own energy, different energies, is a lack of infrastructure.

So – and giving to your question, why – so, we can – Europe can work with Africa, but not in a traditional way, otherwise nothing change, which is the point; traditional ways is a way, the past and the future. What I was saying, very quickly, before, if you go to Africa to invest just to export energy, there is no energy remaining in Africa. If you take a different kind of approach, you say, “I want to discover,” for that reason, nobody in the past, nobody also now is discovering gas, because it’s not easy to export. There are just few LNG in Africa, but there is mainly oil, and with the terminal you can export.

If you discover gas, what was our choice 20 years ago, was to deliver gas to the domestic African market. To do that, we had to invest in infrastructure, that was not our core business, in Nigeria or in Congo, also in Libya. We had to invest in powerplants. We have to invest in the grid, high-tension medium distribution, otherwise, you know, you cannot reach population. And when you do that – why you didn’t do that or why the other people aren’t doing that? Because you are taking a big risk. It’s much easier, and there is less risk normally to take the gas and sell, because you sell outside. With a long-term contract, they pay you in advance practically, because you have a contract for ten years, 20 years, it’s bankable, you go to the bank, you get the finance.

When you sell to the finan – when you use the gas for the domestic market, you know, there is no long-term contract. You had to do that. In the speculation way you invest, you give the gas, you made the infrastructure, and then you have to recover money. And I can tell you, we invest more than 2.5 billion just in infrastructure, powerplant and grid. We are in, and we started 20 year ago. We are still in, we are still recovering the money.

But that is the answer; you have to – if Europe start – and, you know, and we have the same problem. Europe has no energy, big market. Africa has a lot of energy, more than the US, if you put together oil and gas and solar and wind, but there is no market, and no development, no investment. So, we need to work together, ‘cause Russia now is moving from Europe to East, China, India, big, big population, big market. The US is self-sufficient, big market and big production, be it a lot of oil and gas in South America. This fit is absolutely necessary, but we can win only if we invest in infrastructure, we invest to give access to energy. That means that Africa can develop and became a big market. But we have to change the direction that we have now, is to have the North-South. We have to became South that the source – it’s South-North. That is absolutely essential, and that is the format that we are applying. I’ll go to the other question.

Sir Robin Niblett KCMG

No, hold on. Is that infrastructure about – scusi about gas, but if you’re creating that grid infrastructure, you know, that could be used as much for renewables, I’m assuming…

Claudio Descalzi

Absolutely.

Sir Robin Niblett KCMG

…as it could be, you know, for the gas, ‘cause obviously the problem with solar and so on is, you – it’s got to get into a grid, otherwise…

Claudio Descalzi

Robin, the keyword is electricity, so, why electricity? When you create an infrastructure, the grid is for renewable and is for gas, is for the powerplant. So, you can use – so, electricity is also the keyword for the decarbonisation of the big cities, for example. And going back to the question, why you don’t do renewable? We are do renewable in the last 20 years. We are the first developers in Algeria for replacing, in our operation, gas with renewables, solar. We are doing that, we did in Tunisia, in Egypt, we start the first renewable development in Congo in 1994, because there are the conditions.

In Sub-Saharan it’s a little bit more difficult, because seasonally, when there is the rainy season, you lose all your panels, but in Africa sometimes it is difficult close to the sea, because with the condition, with the salty water and the wind and the sand, you have to really work a lot to clean, to keep clean your panel. But we are investing a lot to release gas for the domestic market, or release gas for the country to be able to export and get AB currency for the country. So, we are doing that, absolutely. We have to increase, yes, but that is a private company, at Eni, so, we are doing that, but what – my meaning was that must became a political connection, policy, investment with Europe and Africa, North and Sub-Saharan, because we really, we are – there is a complementarity, absolutely, that we have to develop, especially now with the issue of energy security and diversification, in term of energy sources. So, I think that answer to all my question.

There is the scope 3, but…

Sir Robin Niblett KCMG

Exactly. What I’m going to do is, I’m going to go to Bassam next, and we’ll be closing up in a second. We’ve – the danger of having a cocktail afterwards – I mean, a cocktail – a drinks reception is I always abuse the time a bit. And I also have never been able to get a panel done in one hour, it’s always an hour and 15 minutes, in my mind. Bassam, let me go to you next ‘cause, actually, I’ve got a, kind of, UK-specific question from Olivier [inaudible – 74:47] here, that I want to bring on to you, Tania, at the end. Bassam, which of those questions do you want to take? A lot has been covered, obviously, already, by Claudio, but it lets you pick up on a couple of them anyhow.

Bassam Fattouh

Yeah, I won’t be – I will be very brief, and I will just make a few observations, first to the point of the gentleman. There is no single transition path, or uniform transition path. I think, you know, countries are going to follow different transition path, depending on their core competencies, is on their reserve, on their starting condition. So, that’s why the idea that there is one transition that every country should follow, particularly the African countries should follow, I think that is actually, may not hold.

Now, when it comes basically to the issue of infrastructure, and that actually link to COP27, I think one of the key issues of COP27’s going to be climate finance and how to support developing countries in their transition. Especially nowadays we see that the developing countries are facing a lot of constraints. Debt levels are rising, high cost, you know, currency, US strengthening dollar, high food prices, and at the same time the promised finance to developing countries has not been materialised. So, I think the COP27 is going to be about some of the core issues, and particularly the relation between developed and developing countries and how committed, basically, are the developed countries to finance and to help the developing countries in their transition.

And the final point that I would like to make is that the nature of the competition is changing. Producers in general, African or non-African producers, they need to compete on more than one dimension, so, cost is one dimension. The other very important dimension is also carbon-intensity and reducing emissions. So, in a world where there is a lot of uncertainty, it’s very important for all countries and producers to build resilience, and resilience cannot be based on cost alone, and that is why issue of scope 1, scope 2, scope 3 decarbonisation, and how to increase the resilience through these decarbonisation policies, become quite important. Because I see that the competition is going to be on two dimensions, and some of the producers are in a much better position to compete on the reducing emission and decarbonisation.

Sir Robin Niblett KCMG

Thanks very much. Tania, you’ve got – you can pick up any of the points you want at the end. There’s one question on here, though, for Olivier [inaudible 77:27], and “We talk about European energy security, so, what were we” – I know, the ‘we’s’ rather large, “thinking about selling a large part of Germany’s gas storage to Gazprom, but, importantly, and closing the largest UK storage facility,” was the question here, and I don’t know whether you’ve got a comment about storage and so on, and obviously it’s a big issue in the UK.

Tania Kumar

Yeah, I mean, it’s a good point around storage policy. I think across the Continent, including in the UK, that’s probably one area where that has been underserved, and one area that we, on behalf of industry, are pushing government to do more on. Because as we’ve seen recently in news as well, that storage is going to be one of the biggest crunch points, and that’s where you need government to act quickly. But then you come up against infrastructure challenges as well, to Claudio’s point, you know, before, because this can’t be just switched on, you know, very quickly. So, you know, there is going to be some short-term measures, if we look ahead to autumn now, and planning across the Continent and the UK for what needs to be done in the next few months, and that’s where demand becomes increasingly important. You have already seen this across Europe actually, thinking ahead of engaging with consumers around, sort of, reducing demand, and that’s going to be really difficult for governments across the Continent actually, because you have to engage more with consumers, and understanding their consumption.

Just picking up on many other questions as well, I think there’s an interesting point here, right? When we came out of COP26, we got these set of pledges and, rightly so, there was a lot of, you know, dismay and disappointment because those pledges still only reach us to be just under two degrees in 2030. That is the extent of the challenge at hand, and what we’ve seen is this is a global issue, and what we’re seeing with energy security, it’s a global issue. So, to the point around, as Bassam has also been talking about, this interconnectedness between, sort of, the West and the East we’re seeing like never before, and that’s only going to – set to continue.

The other big issue that’s being discussed, you know, looking at food security, for instance, as well that’s coming out, looking at achieving net zero, whether we’re looking at 2030, 2040, 2050, the importance of having those targets was basically a signal, and that’s where you need to start working on, on delivery.

To the gentleman’s point at the back, that’s where you get this laddering effect of, you’ve got the global trajectory, and that has to filter down from, sort of, at global level to national to local, to then corporate level, and that’s been a real seismic change. Corporates across the UK, you know, in contracts, for instance, you have to have a credible net zero target. You can’t actually compete for government contracts if you don’t have that. That is a huge change for corporates to have to report on it, and that’s what we’ll start, sort of, seeing coming through, that the corporate sector will be moving faster than governments, and also they, sort of, outlast political change as well.

So, that’s a huge new area for, sort of, corporates to step into that responsibility. Yes, there’s going to be a lot of learnings across the way. We need to be sharing a lot more information and understanding those metrics as well, but that’s a huge step-change that we haven’t heard, you know, before. So, I think, you know, looking at some of those challenges like infrastructure, that’s also going to be really difficult, because we’re talking about things like retrofitting huge programmes. It comes with another cost as well, but what we need to make sure is that when we’re going through the transition and looking, sort of, globally, that we are making sure that those other countries also come on that journey faster.

We shouldn’t be letting those countries go through a pathway of what we were doing 20 years ago. We should be, sort of, embedding that now in our interactions, which is what COP President Alok Sharma is trying to do, to make sure that, you know, globally you can skip and learn lessons from countries like the UK and policymaking, how can we fast-track that?

Solar is a really interesting point. As well it comes back to this point of diversity globally, and given geographical positioning as well, who has, sort of, which resources. But if you look at things like the International Solar Alliance as well, giving, you know, different stakes to different players globally. The UK, we have to play a role in that as well, in helping to shape those conversations.

Sir Robin Niblett KCMG

Thank you very much indeed. Look, we’ve gone heavily over time.

Claudio Descalzi

Just two points, actually.

Sir Robin Niblett KCMG

Oh, the one we left behind on price cap.

Claudio Descalzi

On scope 2, on long-term contract and yeah, so, so many, but…

Sir Robin Niblett KCMG

Very quick. Yeah.

Claudio Descalzi

So, very quickly, I said before that the only way to fight the scope 3 is to sell to the customer decarbonised products.

Sir Robin Niblett KCMG

As you said earlier, yeah.

Claudio Descalzi

And that was the aim. For contracts in countries, or in Europe or in America, where you have a big gas hub, you don’t need long-term contracts, because you’re already set in price. The big issue we had with the long-term contract with Gazprom is really to bring this contract to the hub price, ‘cause before the basket was made by oil, products, different kind of stuff, but if you have a strong hub, as we have in Europe, the spot, the ga – the spot market will be higher and higher, like, the LNG coming from the US, most of that 60% is spots, and that will be the future.

If you made, you sell, first maybe you have to make a long-term contract, because there is no big hub or diversified hub, like in Europe. Finish, I think, yes.

Sir Robin Niblett KCMG

Thank you very much for those additional points. The one point I want to make just to close up, what is interesting to me is that the energy security dimension, which is where we started this conversation, doesn’t seem to have changed too much the huge pressure, and if anything it’s accelerating it, I think, for making the energy transition. It’s pointed out the vulnerability that we have of the traditional sources, and seems to be driving even more so, and certainly, I think the private sector, in my sense, is taking that long-term view to the energy transition.

What we didn’t get to talk about is what we mean by net zero, ‘cause I sense there are a lot of different interpretations of what qualifies as taking us to net zero. There was one comment in the chatline here by John Sproule, which mentioned some of the work that’s been done at Chatham House about certain types of biomass: woody biomass, where you can engage in all sorts of different interpretations of whether it really is achieving net zero or not.

There are other types of biomass, which maybe are making those kind of changes and directions, in terms of burning waste and so on. But the whole interpretation of net zero, what, how much fossil fuel production that we hope will be stored, or extracted from the atmosphere, how credible is it, at what price? You know, “what is net zero?” is the bit that maybe we’ll have to have another discussion of later on, ‘cause we throw it out there, and we’re making progress towards it, but many people interpret it, what net zero is, in very, very different ways. And I know this is something we’re very focused on at Chatham House, and my colleagues are, and they would want me to point that out.

But that’s enough of that. We can continue the conversation, if you’ve got the energy, over a drink upstairs. Sorry, got the energy, that wasn’t meant to be a pun, but it came out that way. We have our own biofuels upstairs, I suppose, is the right way of putting it. But can we please thank the panel for really going through a very complex issue [applause], and thank you for coming, and thank you online.