This transcript was generated automatically and lightly edited for readability.

Oliver Strimpel: This is Geology Bites with Oliver Strimpel. We're in the midst of a transformation to wean ourselves away from hydrocarbon energy sources. The large oil companies are very well aware of this and indeed see themselves as playing an integral role in this transformation. But what would that role be? Sir Mark Moody-Stuart is a former chairman of Royal Dutch Shell and is a director of Saudi Aramco, which has the largest daily oil production of any oil-producing company. He recognizes that our response to global warming demands a major change in our energy strategy, and is a prominent voice for change in the oil industry. Sir Mark Moody-Stuart, welcome to Geology Bites.

Mark Moody-Stuart: It's a pleasure to be here. I've enjoyed your other podcasts, but I'm afraid I'm a bit less solidly geological than most of them.

Oliver Strimpel: Well, you started your career as a geologist. What were you looking at?

Mark Moody-Stuart: Well, I wrote my doctoral thesis in Cambridge on the Devonian fluviatile sediments of Spitsbergen. On joining Shell, I was lucky enough to work as a field geologist, first of all in Spain, doing onshore geology to tie in offshore seismic in the Mediterranean. That was an absolutely great job. I told my old PhD supervisor that I could see at least three or four doctoral theses from the work I was doing at that time. The geology of Spain was limited; the bible was a 1936 paper by a German geologist called Brinkmann. And I had a Land Rover, a Galician driver, who was no lover of Franco, and a pretty blank page. My Swiss colleague, who was a year or two senior to me, said, "Mark, you take the Tertiary and I'll do the Mesozoic, and whatever the Balearics are, they're mine."

So then I went to Oman to join Ken Glennie's field party mapping the Oman Mountains. Another blank page, with those magnificently exposed thrust sheets to be mapped. It was really terrific.

Oliver Strimpel: Well, I hope you don't mind me giving away the timeline here a bit, but I think you were doing this in the mid-1960s, at just about the time that plate tectonics was becoming really the accepted paradigm. Were you aware of it when you were doing your work, and did it actually influence the way you looked at things in the field?

Mark Moody-Stuart: Yes. We could see the transition from the thick shelf limestones, which form the Arabian oil field reservoirs, to exactly the same limestone-shale-limestone sequence, only much thinner, and then the thin limestones and red radiolarian cherts of the ocean floor. Thousands of meters of thickness on the shelf, going down to tens of meters on the ocean floor, all beautifully overthrust, and then capped by the ophiolites, with huge hunks of limestone reef in them. And on top of the ophiolite, we knew it was the ocean floor, with Steinmann's famous trinity of red radiolarian chert, pillow lavas and ophiolite. We also knew about seafloor spreading from Vine and Matthews. Fred Vine was only a year or two ahead of me at Cambridge, and his wife is our son's godmother. For the first two years of our married life, we shared a house with Dan McKenzie, who was best man at our wedding. So we had the shelf end well tied down, and could see the transition to the ocean floor and the thrusting. But we hadn't quite got our minds around what happened at the margin of the plate.

Oliver Strimpel: So when the whole theory of plate tectonics unfolded, and I expect you were one of the very first to hear about it, being so friendly with Dan McKenzie, who was right there in the forefront, did it surprise you, or did it just make sense as soon as you heard about it?

Mark Moody-Stuart: No, it kind of made sense as we heard about it. I remember, with my colleague Michel Boeuf, we were working on these thin oceanic sediments, which were kind of imbricated, and we were trying to work out mechanisms of how it worked. We had a theory that actually it would be due to some kind of uplift and then gravity sliding. So when we saw the plates develop, we began to understand. But that was afterwards, frankly.

Oliver Strimpel: So what actually drew you to the oil industry in the first place?

Mark Moody-Stuart: Well, my doctorate was funded by Shell. They gave me a generous grant of 50 pounds a month, and my wife, Judy, was working as a research assistant; she was earning 60 pounds a month. And when I finished that, the choice was basically to continue in academia, if that was possible, or to work for the National Coal Board in the UK. Even then, that did not attract me, being a nationalized industry, and coal. I could have worked perhaps in southern Africa with someone like Anglo American, who I afterwards worked with on, say, alluvial diamonds. But the politics of southern Africa in the '60s was not attractive, even then. And then there was the oil industry, and Shell had produced a number of really good academic papers in the field of sedimentology I was interested in, so I was familiar with their people, and it seemed quite a natural choice. We never imagined that there wouldn't be an oil and gas industry. Well, the gas industry was just beginning in the UK, but it was clearly going to be around, around the world somewhere.

Oliver Strimpel: When was it that you first started to think seriously about the limits imposed by greenhouse gas-induced warming?

Mark Moody-Stuart: Well, Shell and BP first acknowledged the threat of climate change in 1997. John Browne and BP got the credit for a brilliant speech at Stanford, but it was actually in our annual report in Shell, which had been published a month earlier, where we spelled out the risk. But we all thought that it would take a long time. The change due to technology was clearly inevitable. People sometimes forget that Shell had a major nuclear fusion project called General Atomic in the early '70s. It was not a successful venture and cost us a lot of money.

Once, in the '90s, I asked the great Saudi oil minister, Ali Al-Naimi, who in many ways is the father of modern Aramco, what he thought of renewable energy, and he said, "Mark, don't worry about it. It's technology, and technology will do what technology always does. It will change things." And he was, and still is, an enthusiast for it. It's a matter of time. When I joined Shell, we knew that the world would never burn all the coal available, and that the same was probably true of oil. The big question was when, and how do you catch the wave? Too soon, and the traditional competition on the market will kill you; too late, and you die as an irrelevant and aging beast. It's a very major challenge, for companies and societies.

Oliver Strimpel: Just a bit later, the conventional wisdom was that oil demand would start flattening in the 2030s, but you thought it would happen much sooner. And why was that?

Mark Moody-Stuart: Well, the historical shifts in energy have happened over 30-year cycles. For example, in the 20th century, which you and I have lived most of our lives in, we started with coal and wood and a little bit of oil to provide kerosene for lamps and save the whales, and, someone reminded me, oats, which provided energy for the horses. And then gradually change came. Fuel oil replaced coal because of convenience; it's much easier to pump things than shovel them. Natural gas replaced fuel oil, and we in the industry learned to take hydrogen and convert the fuel oil into lighter fuels, transportation fuels. And you could see these changes happening on, as I said, 30-year cycles, roughly.

But there were examples, and are examples, in our industry of much more rapid growth. If you remember, in the early 2000s, there was a process of incentivizing farmers in the US, corn farmers growing maize, to convert it into ethanol. It's not a very good idea, but given the incentive, it happened that within four or five years there was the capacity to convert half the US corn crop into ethanol, and half the US corn crop is a quarter of the global corn crop. And it had big impacts on Mexico, obviously, on food and so on. A remarkable change. As I said, it was a very bad idea and not good for the climate at all, but nonetheless an example of rapid change. Equally, we could see in our own industry the growth of shale oil, which went from zero to 6 million barrels a day in the space of three or four years. Astonishing speed. So we knew that there could be rapid change.

Now, demand growth is the difference between two very big numbers. OECD demand growth has been falling for quite some years, but this is offset by emerging market growth. So you have the OECD declining and emerging markets growing, particularly China and India, but other markets in Africa and Latin America too. But with COVID and the economic hit, demand dropped drastically. Emerging markets were badly hit, and we don't know when they'll recover. I used to think that peak demand would probably be in the mid-'20s, which was earlier than many people in the industry thought, because when you look at the small difference between these two very large numbers, you could see it could quite easily flip. Now, with the change, I think maybe in 2019 we may even have seen the peak.

Oliver Strimpel: Gosh, that's amazing, so much earlier than anticipated. So when demand for oil does flatten or start falling, as indeed it may already have done, do you see oil prices continuing to fall? And if so, what effect will that have on the big oil-producing countries?

Mark Moody-Stuart: Well, oil is a very unusual commodity, and has been so since the 1970s. Unlike all other commodities, if you look at iron or copper, nickel and so on, the lowest-cost producers dominate the market, and they have, say, 80 percent of market share. In oil, the lowest-cost producers, the big Middle East producers such as Saudi Arabia and the Emirates and Kuwait and Iran, have held back their production to maintain the price. The result is that with that constraint on production, the low-cost producers have only about 30 percent of market share, and that allowed those high prices. And I remember it from the North Sea: the price saved the development of the North Sea. We had big cost overruns, so the North Sea was more expensive. Extra technology was able to come on stream. The North Slope of Alaska came on later, the Gulf of Mexico deep water came on, and most recently shale. Repeatedly, OPEC and friends were constraining their production and allowing higher-cost producers to grow.

And that's fine as long as the market's growing and prices can be kept high. The major Middle East producers were happy because they could increase their production slightly to meet inflation. Saudi Arabia, as long as they exported, say, 7 million barrels a day of oil, they were happy at a reasonable price. But when demand flattens, there will be, there is, a fight for market share, and that's very difficult for the low-cost producers who depend on oil income for their societies. They want to increase their production to offset the loss of oil price, but it has to be balanced: if you do it too fast, the oil price will crash. Many major projects have been canceled, so there's not much new production coming on, and with natural decline, production will get back into balance. Saudi Arabia has always kept one or two million barrels a day (extraordinary numbers) in spare capacity, ready to turn on. And there's been a drastic cut of investment in new ventures by the international oil companies. So we may get a spike in oil prices, but I think basically prices not much above, say, $50 a barrel are very likely.

Oliver Strimpel: OK. So the next transition will take us into altogether very different kinds of energy source, not just from one carbon-based resource to another, but to things like wind, solar, geothermal and others. In fact, several respected forecasts have suggested that we will actually need lots of new energy sources, each of which will not be as dominant as oil and gas have been in the past. So in this new world, what know-how or infrastructure can the major oil companies contribute to this transition?

Mark Moody-Stuart: Well, the transition is going to need not just lots of small projects; it's going to need integration, and the management of large projects and their integration. I'll give you an example: Envision Energy, a creative Chinese renewable energy company that I have an involvement with as an advisor. Zhang Lei, the boss of that, says if he could get a contract for 10 gigawatts of wind turbines in Mongolia, he could radically reduce the cost of building those turbines. He would design them specifically for that location. The turbine blades, which are a big problem, could be manufactured more or less on site, obviating transport. The energy could then be taken from western China to eastern China through China's network of very high voltage, ultra-high-voltage DC transmission lines, which reduce the loss. And you have a time difference between western China and the coast in the east, so that when the sun and solar are still working in Mongolia, the lights are out in the coastal region.

That sort of major project, transmission and generation, needs integration and balancing. It also needs trading, energy trading. And if you look carefully at the accounts of the major oil companies, certainly BP and Shell, major profits they've made come from trading, trading oil, knowing what the requirements are and handling the integration between different demands. It's a major skill. Pipe infrastructure will also be important, which can be repurposed, as we did with natural gas in Europe. Household gas was provided from coal gas, town gas, a mixture of carbon monoxide and hydrogen, and with natural gas we had to convert that to methane, a major job done all across Europe, very effectively. So I think there are many skills which can be used, which will be needed. The question is, will the majors have the wit and capacity to do so? At the moment, I buy my electricity, renewable electricity, because it's traded, from Shell. I have an electric vehicle, which is charged by a Shell-installed charger. So it is possible, whether it will happen or not.

Oliver Strimpel: So now, you mentioned repurposing infrastructure such as pipelines, and I'm wondering if you're referring there to the use of hydrogen. I actually know you're a great fan of hydrogen in the energy equation. Why is that?

Mark Moody-Stuart: Well, I am a fan of hydrogen. And of course, one of the first uses of hydrogen could be to inject it into methane-carrying pipeline systems at relatively low percentages, which is very easy. I used to say that if I ever bought a new car (we hadn't bought a new car for 20 years, because we were happily running old Priuses, which have done 280,000 miles), the pick would be a hydrogen fuel cell vehicle like the Toyota Mirai. I think actually I was convinced by Michael Liebreich of Bloomberg New Energy that my economics were wrong, and that it should probably be done by fully electric vehicles, and we have actually bought a new, fully electric vehicle, a remarkable machine. But I think hydrogen can work for storage and heavy transportation, ships, even aircraft, because we can't just rely on batteries. Batteries will be an essential part of storage, repurposed vehicle batteries and so on, but batteries need enormous resources, mined resources, and many of these come from difficult places. And we can't run everything on electricity. Steel, for example, we can't run on it. So hydrogen is very important for the bits that electricity can't necessarily reach directly.

Oliver Strimpel: So, yes, I can see that, heavy transport by road, sea and air. It's hard to imagine an electrically driven airplane, although, you know, we'll probably have those in due course too. But you mentioned batteries, and the importance of batteries becomes greater when you have an intermittent supply such as wind and solar. Obviously those only work when the wind is blowing or the Sun is up and shining. So does hydrogen play a role in those circumstances, you think?

Mark Moody-Stuart: Absolutely. Hydrogen is an alternative storage method. If you have renewable energy available at a time when you have more renewable energy than you need, you can either store it in batteries, or use pumped storage, which would be the ideal (pumping water uphill to dams and then letting it run down again), or store it as hydrogen through electrolysis. So-called green hydrogen is an obvious answer. It's expensive at the moment, and there are projects to radically reduce the cost of the electrolyzers, as has been done in wind and solar. In any situation where you have a large amount of renewable energy, there will be times when there will be excess, and at the moment, if it can't be stored, it just gets shut off and shut down. It's curtailed, as they call it. The scale of Chinese curtailed production at the moment is enough to power the entire United Kingdom, every single electricity requirement of the United Kingdom. And so I think it's very important.

There are challenges as to how it can be transported. It can be transported as ammonia. Saudi Aramco has just made the first ammonia shipment. That's not green ammonia, it's blue ammonia, so the carbon dioxide has been captured, and it's going to Japan for power generation. So Japan is looking to generate power from ammonia, which is really hydrogen. So it's extremely important, I think, and it's undergoing something of a revival. When I was in Shell in the late '90s, early 2000s, we set up a hydrogen unit. It's had a mixed history since then, but it's really coming back into its own.

Oliver Strimpel: I think hydrogen is undergoing quite a vogue at the moment. Some of our listeners might be geology students wondering about their employment prospects in a world in which the major oil companies are no longer prospecting for oil. What would you say to them?

Mark Moody-Stuart: Well, this transition is going to take quite a while, and we are absolutely going to need geologists. At the moment, the major companies are concentrating on exploring, looking for fields which have lighter hydrocarbons, so less intense from a carbon point of view, and things which are close to the markets, and so on. It also will be important because carbon capture and storage, under almost any scenario, is going to have to play a part in this transition. So we're going to need geologists to find the reservoirs and caps where we can safely sequester large volumes of carbon dioxide in aquifers, and we'll need to find those reservoirs close to the areas of habitation and industry. Then there'll be dams for storage; demand for copper, which is needed for electrification; other minerals, such as lithium, cobalt for batteries, nickel; and how we find these elements in places which are accessible and stable. And then there are all the tricks of using artificial intelligence and making the production of oil and gas more efficient. There are endless ways of geologists finding employment.

But I would also say to anyone considering a university degree, it's worth doing something which you're really excited by. And geology is exciting. And if you do it and are good at it, I'm confident that you'll find employment. There are lots of historians doing work and who find gainful employment, and who tells me that a historian is any better than a geologist, who is, after all, a kind of historian?

Oliver Strimpel: For my last question, I'd like to ask you: if I were to appoint you to lead a world government with infinite powers, what would you do about climate change?

Mark Moody-Stuart: OK, that's a difficult and intriguing question. I think the answer is I would introduce a mixture of economics and regulation. Ever since the late '90s, we in many of the major oil companies, certainly the European oil companies, have been saying we need to put a price on carbon. Now, you need a price on carbon if you're going to make carbon capture and storage economic. Somebody has to be prepared to pay for the storage; you are avoiding a damage. So you need a price on carbon. Almost any economist tells you that's the way to do it. You can do it through cap-and-trade systems or through taxation. To force change, you need a relatively high price, so you can't do everything by taxation. We've had high gasoline prices and diesel prices in Europe due to tax. The bulk of the price we pay for gasoline and diesel in Europe is due to tax, and that's had an effect. As a result of that, we have more efficient vehicles, and people realize that you'd better get something which is a bit more economical than a gas guzzler. But if the prices go too high, you damage rural economies, and we've seen that in Britain. If I go back to my time, I remember when the finance minister, Chancellor Gordon Brown, wanted to put the price up, you had striking truckers on the street, because they said, "We can't afford to pay this. You're doing me out of my job."

So apart from pricing, you need efficiency mandates for vehicles, or regulatory frameworks for power generation saying ban coal, or no power generation unless you have capture and storage of the resulting carbon dioxide. I don't think we drive less comfortably in Europe than you do in the United States, but we do so far more efficiently. And it's been demonstrated, including in the United States, that the fuel efficiency mandates, the so-called CAFE standards, have worked well in the US in the past when they've been applied. But then every now and then, a government comes in and cancels them all, and all the improvements in efficiency go into bigger and heavier vehicles and acceleration. And that's complete madness.

So we need a balance between economic measures, taxation, pricing bad things like the emission of carbon dioxide, but at the same time regulation, which is accepted by everyone and hides the cost. Of course, people pay for it, because you have to work hard to redesign things to make them more efficient, but it's not much of a cost, and it's fairly well hidden from the consumers. So I think that's the answer: a mixture of economics and regulation. It would be fun, but nobody is going to offer me the job.

Oliver Strimpel: Sir Mark Moody-Stuart, thank you very much.

Mark Moody-Stuart: Not at all. Thank you. It's been a pleasure.

Oliver Strimpel: For more about Geology Bites, as well as pictures and diagrams that illustrate this podcast, you can go to geologybites.com.