Interview by STSA.
What part do you see yourself playing in the energy transition of Mercuria?
Each company has its own strategy. We feel very clearly that we have a moral obligation to get heavily involved in this transition – and that’s not based on ROI or equity. When you move into the renewable space, a lot of those investments can be quite dangerous. We transact USD 130 billion in commodities every year and many of our clients and counterparts are big emitters. It’s not infrequent to see negative prices for power when sun and wind are out there. It can be dangerous to invest in the renewable sector without understanding the components and the risk involved. We feel we have a better understanding of the forward curve and should have a role to play in helping people invest in that sector.
Also the transport industry may be in search of a solution, be it electric, renewable/natural gas, or biofuels. We have (in a joint venture with Chevron) the 2nd largest business portfolio of renewable natural gas distribution systems in the US, but we have also invested in electric vehicles and recharging stations. Waste management companies are another important component for us.
It is also crucial for people to understand the implication of reducing their emissions, and how they can benefit from government funding, both in Europe and the US.
What do you think the fuels of the future will be? Do you see them being driven by a collection of fuels (i.e., renewable gas, biodiesel, green hydrogen, etc.)?
I think they will play a large part, but it’s important to remember that it is impossible to solve the energy transition without having buy-in from a good segment of the industry. Some people see the future in blue hydrogen or green hydrogen, but we believe it’s going to take a few years before it comes to market and serves broader investments on the logistic chain through ammonia and shipping.
The logistics of it all are quite complicated. You're going to have to build infrastructure to support this, but it’s obvious that solar, wind and the other renewables will have a big role to play. People use natural gas as a transition, but the usage of coal is still pretty high, and I think there’s no silver bullet. Every part of the chain of industry will have to look into their emissions and see how to solve these issues based on eventual carbon prices.
Do you have a carbon price that you apply to your investments internally?
Yes, we do, because if you look, for instance, at upstream we’ve been asking ourselves “Should we invest in the upstream oil industry?” The answer is yes. Oil will be around for a very long time, so you must pass several tests first. On one hand, you have to differentiate the carbon intensity scope and the other, your crude, to ultimately see that not all the crude is the same. In the UK, for instance, you pay a carbon tax, which has to be factored into your investment costs. Further, because of our pledge to have 50% of our investment in the transition sector, as opposed to the carbon sector, we can’t make a very large investment in the oil sector, unless we do the same in the renewable sector.
