Both True — One Eye Part 4: It’s Too Soon

As we enter week four – we are just settling into the severity and challenges of our new lives. This issue is a reminder to industry leaders to keep one eye on the future today. There is plenty of evidence that social risks will return along with our to-be-celebrated-and-never-again-taken-for-granted normalcy.

Both of these things are true:

  • Today’s challenges take all of our energy, wit, and capacity.
  • Keeping one eye on the future means preparing for the social risks that are inevitably ahead.

The situation:

COVID-19 is drastically rearranging life as we know it — but some social risks to oil and gas are continuing and could even accelerate, depending on how events play out.

At Adamantine, we believe that the industry can now seize an unprecedented opportunity to transcend those risks and the political and perceptual divides driving them — with mindful leadership. My team and I are watching the following trends, which may become tripwires if we aren’t careful.

  • Government stimulus serves as a change agent? As the health crisis has turned into an economic recession unseen in generations, governmental organizations around the world are engaging in massive economic stimulus. These sweeping governmental fiscal interventions are correctly inspiring debates about how these investments will (or will not) reshape society as we know it. While health care, the economic safety nets, and transportation infrastructure grab the headlines, numerous meaningful calls to recreate the global energy system are being hotly debated:
  • Investors remain under fire. Although investment firms have turned their interest to the massive financial and policy swings underway, we are not seeing a reprieve on ESG-related pressure:
  • Stimulus + investors = more social risk. And speaking of BlackRock, the firm will be managing the U.S. Federal Reserve corporate debt buying program, so hypothetically their sustainability investment lens may be applied to the federal money. How this plays out might have been more mysterious if they hadn’t just won that EU advising contract.
  • Aid efforts backfire on public opinion? As segments of the oil and gas industry argue for federal help — whether increasing barriers to importing oil, relaxing of environmental rules, or receiving direct fiscal support — the public can be expected to turn a skeptical eye. We expect pre-pandemic opposition to oil and gas to be exacerbated by any perceived special treatment for the industry.
  • New opportunistic activism is born. The pandemic has created two new fronts for opposition to oil and gas:
    • We’re seeing aggressive calls to dismantle (or at a minimum not help) the fossil fuel industry during the downturn and resulting federal financing. This article weaves in all the themes of today, from stimulus to BlackRock to bailout perceptions.
    • Around the country, opposition to new permitting, construction activity, drilling projects, and operations is being pushed through a pandemic-health lens. For example, in Colorado, several groups including 350 Colorado submitted a digital petition to Governor Polis calling for all fossil fuel activities known to release air pollutants to be halted for at least 30 days and until the pandemic is contained in Colorado.

The critical mistakes not to make:

  • Play defense. It’s tempting during challenging times to regress into our bad, old habits of reactionary, one-off defense. The opportunities to transcend historic divides are too big for us to engage in individual philosophical knife fights over each condemning article or unique protest.
  • Hope for a return to the past (even February sounds good, I know). I’ve read a number of industry-supporter narratives where anti-oil and gas sentiment falls in a post-pandemic world. Notably, I have not read one of those that was written by someone outside the industry. The only way the world will move is forward — we cannot expect a return to a time where the oil and gas industry was revered for its contribution to society. (Although perhaps we can create that future … see below.)
  • Focus on the finances. I still see too many company communications focused on bottom line changes. We are having an unprecedented health and humanity crisis in North America; we must rise to that occasion.

Seize the day: Our seize the day themes for the next few weeks will be purposefully redundant. We have an unprecedented opportunity to transcend historic polarization and opposition by keeping one eye on the future.

  • Give back out there. As we discussed last week, companies need to engage as civic leaders in response, recovery, and rebuilding our communities. Kudos to Phillips 66 and your $3M relief fund.
  • Prepare for the return of climate and ESG. You were getting ready before the world turned upside down, so ensure that your team is keeping these efforts on their plates. At Adamantine, we believed you had 4 to 9 months since the start of the pandemic until this would be back near the top of your list of priorities, depending on the makeup of your investors and stakeholders.
  • Imagine what the new energy world order will look like. For the last week, the news has been filled with speculation about what will change in a post-pandemic world. Perhaps we will travel less and work at home more. Perhaps small companies across industries will go out of business. Perhaps ride-sharing is dead or poised to pivot to food delivery. Perhaps we will find more capacity for compassion and kindness within ourselves. For all these imaginings, ask yourself: What might the ideal energy system look like?
  • Articulate your place in that new order. Not yet, but within the next 6 to 12 months. Our industry must lead in the post-pandemic recovery and reinvention of life as we know it.

Kevin Krausert, CEO of Beaver Drilling, was out of the gate quickly on March 23 with just such a vision for the future of oil and gas. Stay tuned for more on Kevin in the months ahead, as I’ll be looking to him for his take on industry leadership. I would also like to hear yours. Hit reply and fill me in.

In April, Adamantine’s own Anne Carto provided advice on engaging with newly elected officials (the wheels of politics continue to turn!).

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