Environmental Engineering Reference
In-Depth Information
the cost of many renewable energy systems will come in the form of big
upfront costs and with subsequent costs for maintenance (although with
zero costs for fuel, in the form of wind or sun). Moreover, the uses of elec-
tricity are also going to expand. Providing that we can find new ways of
generating it carbon-free, this is a good thing. Powering cars, for instance,
is one potentially enormous new use for electricity.
But the part of the energy industry with the highest financial profile is
undoubtedly the big oil companies. Their offshore platforms are the most
spectacular engineering part of the energy industry. Until the develop-
ment of big wind turbines, their service stations made the biggest visual
impact on our landscape of any commercial sector. And the tax on their
petrol sales is a staple of government budgets.
Big spenders
Most of the companies' capital expenditure (or “capex”, as it's known) is
upstream - meaning exploring for and producing oil and gas out at sea,
in the frozen tundra or in the desert - because that is where their biggest
profits are. This expenditure upstream more than tripled, according to the
IEA, from an annual rate of $120bn in 2000 to $390bn in 2007. Nearly two-
thirds of this was spent by the international oil companies (as distinct from
the national companies, such as Saudi Aramco, that are either state-owned
or operate just within their national boundaries or both) and half of that
was spent by just five companies. These are the so-called supermajors -
ExxonMobil, Royal Dutch Shell, BP, Chevron and Total. They acquired this
grandiose title in recognition of how they grew during the late 1990s when
the oil price hit a trough of $10 and set off a wave of mergers between com-
panies (which were already pretty big). Exxon merged with Mobil, BP with
Amoco and Arco, Chevron with Texaco, and Total with Petrofina and Elf.
Only Shell was big enough already to stay in the top five without a
major acquisition. After a scandal in 2004 about overstating its reserves,
however, the half-marriage dating from 1907 of Royal Dutch Petroleum
and Shell Transport and Trading of the UK was finally consummated and
the two firms were rationalized into a single integrated company called
Royal Dutch Shell.
In 2008 the combined capex of the Big Five was $106bn. Where does
this money come from? Mainly from the companies' own balance sheets.
The oil companies take in huge amounts of money - the Big Five pro-
duced a combined net profit of $136.49bn in 2008 - but they also pay
out huge amounts on new projects. When the big oil companies have to
