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Andy Brown (Galp): “We don’t want to help finance the atrocities we are seeing in Ukraine” | Business

What follows is a conversation in two acts. The CEO of the Portuguese oil company Galp, Andy Brown (United Kingdom, 60 years old), first attends to Business by phone on the eve of the Russian bombs beginning to fall on Ukraine. After the radical change of scenario and with oil already clearly installed above 100 dollars per barrel, the head of the energy company answers three more questions about how everything has changed in an industry, the energy industry, which is going from shock to shock . Brown landed in Galp, 7.5% owned by the Portuguese state, just over a year ago after two decades at the British giant Shell.

Ask. They have been one of the first European oil companies to suspend purchases of Russian crude. How far can this boycott go?

Answer. We do not want to help finance the atrocities we are seeing in Ukraine. It is something as simple as that, and we are happy, and very proud, to have the unanimous support of the board of directors for a decision that may have an impact on our results. [de la división] of refining Other Western companies and countries are still dependent on Russian oil and gas supplies, and it will be up to them to decide how far they want to go.

P. What impact will it have on the energy sector in that country?

R. Huge and permanent. The invasion of Ukraine has triggered a shift to alternative suppliers and will accelerate the transition to renewable energy. Most of those lost sales are unlikely to come back: Russia is cutting ties with some of its best customers.

P. Can the EU survive without Russian oil and gas?

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R. It is a great challenge, especially in Central Europe. The European Commission initiative has many good proposals, but they all require time to be implemented.

P. Even in circumstances as difficult as the current one, a triple-digit barrel of oil is caviar to the ears of the oil companies.

R. We already experienced something similar 10 years ago. At that time the companies [del sector] they did not make an intelligent use of capital: it was a golden age, but looking back, too much money was spent on investments that did not pay off… It is important to take this into account now, to avoid entering into a dynamic of boom and bust. Unlike the previous cycle, between 2009 and 2014, this one will not be as long. We do not foresee a long-term revival of the oil business. It is something short-term, and those of us who are involved in this must take it into account: continue investing to guarantee supply, but not think that [el barril] it will be over 100 [dólares] for many years, because that is not going to be the case.

P. The high prices, although they only remain in the short term, do seem like an opportunity for the large companies in the sector to expand their commitment to renewables.

R. Our strategy does not change at all: we maintain the discipline and the idea of ​​allocating half of our investment to zero emission businesses. But it is true that these high oil prices help us generate cash and get the money we need to generate new businesses and have the financial power necessary to speed up the transition. [energética].

P. When do you expect these new businesses, linked to renewables, to surpass the traditional gas and oil business?

R. By 2030, half of our business will already be from renewables. No other company in the industry talks about such a fast transition: I think we will be able to make a faster transition than our bigger competitors.

P. When will Galp sell the last barrel of crude oil?

R. In 2050 we will sell no or very little oil: we will sell electricity, hydrogen or biofuels, but not fossil fuels.

P. Are renewables, at this moment, a more profitable investment than oil exploration and production, even with a barrel above 100 dollars?

R. Not only do you have to look at the returns, but also the risk. To obtain oil you have to spend a lot of money in the exploration phase and they are usually countries where the risk is higher. And we, over time, are moving towards lower risk investments. It is part of the transition in which we are immersed.

P. Before the war blew everything up, there was already a clear imbalance problem between supply and demand. Was it a miscalculation of future demand that caused them to stop investing in new wells?

R. I don’t think that the companies were wrong in the calculation. Ensuring that there is a sufficient supply of energy at affordable prices is not only a task for companies, but also for the Government. If they are going to put in place rules that stop investment in oil and gas projects, there will be no investment in them and, therefore, there will not be enough supply either. But the demand remains, because almost everyone still has diesel or gasoline cars, uses them in their daily lives and still needs fuel. This is a transition, not a process where the old system changes overnight. And it will take a few decades to become a reality.

P. High oil prices like the ones we see today make any other energy source look cheap by comparison. Does this help speed up the transition to renewables?

R. Yes. Biofuels, for example, particularly second-generation ones, which are produced from waste, have typically been very expensive compared to fossil fuels. And now, instead, the high price of oil makes them clearly more interesting. Also hydrogen. This situation has some positive consequences in terms of accelerating technologies like these.

P. In a current price crisis, it would seem that a high oil price should lead to more electrification. The problem is that electricity is also historically expensive today in Europe.

R. We are in a unique crisis, which affects oil and natural gas, which also extends to the electricity market through the latter, and to which the lack of rain and wind in some countries have also contributed. The number of factors that have occurred at the same time have caused a perfect storm.

P. Despite the growth of renewables, the global energy matrix has changed very little in recent decades: fossil sources clearly continue to dominate and emissions associated with energy have not stopped increasing.

R. It is true that it has changed little in the last 50 years, although it is already beginning to do so. The momentum is important, and that momentum points to a rapid acceleration of renewables. But yes, it will be decades until [el mix energético global] completely changed, and that’s something we all seem to be realizing now.

P. Do you see Spain and Portugal exporting green electricity and hydrogen to the rest of Europe in the coming years?

R. The Iberian Peninsula is one of the most attractive places on the continent to produce green hydrogen. It has the possibility of generating renewable energy at a relatively low cost, has a very favorable regulatory environment and is in a European context for promoting this activity. In the longer term, however, it will have to compete with green hydrogen from Brazil or Middle Eastern countries, which will be transported in liquid form.

P. His business continues to depend largely on the sale of gasoline and diesel for automobiles. Do you think that the transition to electric vehicles will be faster than expected?

R. More than 60% of the vehicles that will be sold in Europe in 2030 will be fully electric, but it will take a long time to replace all the combustion ones. What is clear is that in our markets we will see a drop in the demand for diesel and gasoline, and we have to be prepared for it. That is why we invest in new fuels, in charging electric cars… We have a network of more than 1,500 service stations and that gives us an opportunity to sell our customers not only fuels but also electricity.

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