Shale-Oil Banker Tells Houston to Embrace Energy Transition

(Bloomberg) -- The energy transition is coming to Houston and North America’s oil capital better get ready, according to one of the city’s best-known oil bankers.

The oil and natural gas industry is about to undergo a seismic shift as climate change pushes cleaner energy sources to the forefront, Bobby Tudor, founder of investment bank Tudor, Pickering, Holt & Co., said Wednesday in remarks prepared for an address to the Greater Houston Partnership, a civic group.

Although Tudor’s warning is something environmentalists, academics and European oil CEOs have been saying for a few years now, it’s now coming from an unlikely herald: one of the key financiers and beneficiaries of an industry that generates one-third of Houston’s economic output.

“The economic vitality and growth of our region’s economy is inextricably tied to the energy industry,” the 60-year-old Tudor said. “The traditional oil and gas business is not likely to be the same engine for growth in Houston for the next 25 years that it’s been in the past 25 years.”

Houston has for decades been the epicenter of the North American petroleum and chemical industries, and is home to roughly 4,600 energy companies, according to Tudor. That puts America’s fourth-largest city in an interesting position as climate change prompts calls for a dramatic shift in how businesses and consumers power trucks, trains, airplanes and power plants.

Every Corner

“If you own a restaurant, or a law firm, or a clothing retailer, or a travel agency -- the health and vitality of the energy industry matters to your business and to your community, and in all probability it matters more than you know,” Tudor said. “The wealth generated by the industry has been widely impactful in our city.”

Tudor insisted that it’s not the end for oil and gas. Neither production nor consumption are “disappearing any time soon,” he said. But the challenges are daunting.

“Coupled with poor financial returns, climate change concerns have the industry dramatically out of favor at the moment, in most every corner of the investing and political world,” he said.

Gas will play a major role in the transition, he said, despite the objections of some environmental groups and politicians who advocate a total rejection of fossil fuels.

“There is fantastic business opportunity for us in this effort,” Tudor said. “It’s necessary and it’s the right thing to do.”

BlackRock’s Plan

Even as some investors are demanding more refined and fulsome corporate disclosure of environmental, social and governance metrics, oil executives aren’t clear on how to comply, Tudor said.

“It’s very early days,” he said. “There’s a lack of clarity around what investors really want from energy companies.”

The topic hit the headlines last week when BlackRock Inc. Chief Executive Officer Larry Fink wrote investors to unveil a plan to incorporate climate-change considerations into investment decisions.

But as for oil executives, there was little in Fink’s letter to act on, Tudor said.

“I think it was very squishy,” he said on the sidelines of the Houston partnership event.

Was it virtue-signaling?

“Yeah, that’s my view.”

A BlackRock representative referred back to the letter, in which Fink requested disclosure in line with the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures.

To contact the reporter on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Joe Carroll

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