Tony Hayward - The Switch Interview

- The fundamental driver of the world's demand for energy is about two things. It's about population growth. In the time since I've been on the planet, which is about 50 years, the population has doubled from three billion to six billion, and in the next 30 years, it will increase by another 33 billion people. So, the first driver is population growth. And the second driver is people wanna have a high quality of living. So, you know, over the next couple of decades, there are somewhere between one and two billion people will move from a rural way of life to an urban way of life. Can I tell you a little story? - [Troy] Sure. - So my, my energy story. So, 20 years ago, I lived in Beijing, and I wasn't allowed to drive, so I had a young guy as a driver. And he lived with his wife and very young son and parents in a two-roomed hut, and they had a cold brazier and two kerosene lamps. That was their energy consumption. Last summer, I took my family back to Beijing. Same driver, still working for BP, still as a driver. We spent two weeks in Beijing doing the Olympics. At the end of it, he said, come and see my new apartment. So we went to his new apartment. He's got an underground carpark with his Chinese-built car in the basement. We get out on the 18th floor. There's his wife's electric scooter on the landing. We go into the apartment. It's a three-bedroom apartment. It's got heating for the winter, air conditioning for the summer. It's got a big American-style fridge/freezer, bigger than anything we've got in the Haywood household. There's a flat-screen TV on the wall of the kitchen, small one. There's an enormous flat-screen TV on the wall of the lounge, and there's a flat-screen TV on the wall of each one of the bedrooms. That man's still doing the same job he was 20 years ago. But think about his energy consumption. Two things. It's a tremendous testament to what China has done, lifted 350 million people out of poverty. But the energy consumption that goes with that is extraordinary. You know, his energy consumption is exponential, relative to what it was only 20 years ago. - Yeah. - And the great news is, 350 million people have done that. The slightly more disconcerting thing, there's another one or two billion to go, if you add up China and India and Africa. So, that's, you know, that's the energy challenge, and that's why we need all of it. It's not either/or. It's all of it, and the transition to a much lower carbon-intensity world will take place over three or four decades. So the natural transition in the vehicle fleet is energy efficiency, biofuels, hybrids, electrification, over the next 20 to 30 years. The interesting thing, the auto industry, over the last 30 years, through technology, they've increased the efficiency of the internal combustion engine by one or two percent a year. That has not translated into more miles per gallon. It's translated into bigger cars that go faster. So, you know, the whole drive behind the current US administration policy is to translate that technology and efficiency into efficiency in the fleet. There's nothing in that that is not achievable today in terms of the technology. We need to do some development of some of the technology, but it's not like it's a big step up. It's development; it's not research. And we will see in, you know, I don't know, five to 10 years time, the average miles per gallon of the auto fleet being north of 35, probably closer to 50. - How does that transition look, from biofuels on through to other options? - We will see progressive penetration of biofuels into the fuel transport pool, and, you know, people have different views of how fast and to what extent. It seems reasonable that 20% over the next 20 years is sort of for sure, and it could be as high as 30%. And it will be not ethanol from corn biofuels, but it'll be ethanol and probably butanol, from ultimately lignocellulosic. That's normal sort of plant material. So, there's gonna be a big, big impact on the gasoline pool. - [Troy] The electricity demand is already more steep than their total energy demand, and then you start to put it into cars. - Yeah. - [Troy] What are some of the challenges? - Well, so, you know, there's no point going to, the obvious thing is that there's no point moving the vehicle fleet from gasoline or biofuels to electricity unless we've created a low-carbon source of power. And that I think is why it's 20 or 30 years away, and I think, you know, the problem with hybrids is that they're expensive, 'cause you gotta have two drives. So then we're never gonna create the $5,000 hybrid car, because you've gotta have two trains, two drives, and that, you know, you can't do that. So, you know, hybrids will be a part of it, and they'll be a part of it for the more expensive end of the car fleet, but they won't be a part of it for the low end of the car fleet. - You see us ever putting compressed natural gas into vehicles? - I think that's unlikely. The reason I say that is that it requires a whole new system of infrastructure to be put in place. The route that I articulated, you can go down using existing infrastructure. So you don't have to start building compressed natural gas gas stations all over the country. Now, there are some parts of the world that will happen. Some parts of the world, it already has happened. You know, BP has a big compressed natural gas business in Cairo. But I don't think we'll see it develop as the principal form. I think we'll see that develop in some niche urban locations. - [Troy] You mentioned earlier things that could substitute for liquid fuels in vehicles. Biofuels you mentioned, electrifying the fleet, compressed natural gas. Let's start with biofuels. - Okay, so, corn-based ethanol has two problems. Well, three problems, probably. Firstly, it's expensive. So it only really works when the oil price is very high, you know, knocking $100 a barrel, and it's competitive. Anything less than that, and it isn't. The second is of course it s a food crop, and it will only grow on land that you can grow food crops on. So it does compete with food. And the third, because it's a food crop, in that sense, it uses a lot of water. So it's not a very good crop to make biofuels. In the tropical regions of the world, there's a far better crop called sugarcane, and ethanol from sugarcane in Brazil is commercial at $40 a barrel. It can be grown on poor-quality land, and whilst it requires water, clearly, there's plenty of water in Brazil, but it's not a case of having to knock down rainforests to grow sugarcane. So today, in today's world, the best form of biofuels is ethanol derived from sugarcane. There's a lot of development, technology development going on today, to seek second- and third-generation biofuels. That's about two things. It's about what the feedstock is and what molecule we should be using, because the problem with ethanol, it's not a very good molecule. It's not very energy-intensive, and it attracts water. So it's not very good in terms of putting it into an internal combustion engine or putting it into the infrastructure that we have available to distribute gasoline. So, there are two, two big pushes in the world today. One is to find a different feedstock, and the big push is into so-called lignocellulosic material. Better to think of them as energy grasses. And they are, I mean, essentially, they are temperate sugarcane. That's what it looks like. Long, thin stalks. It has high sugar density in the cell walls of the plant. Miscanthus, which is one of these energy grasses, or some other forms of energy grasses, can basically grow on land that's unsuitable for growing much else on, and, you know, surprisingly, you don't need very much water either. So they're sort of ideal. A gallon of biofuels from that source has about 70 to 80% of the energy of gasoline, but the CO2 budget, of course, is dramatically different, dramatically different. So net, net, plant to wheels, reservoir to wheels, there's about a 90% reduction in the CO2 emissions associated with the process and utilization of a gallon of biofuel produced in that form versus a gallon of conventional h