Barely 24 hours after revealing Cepsa’s roadmap for the remainder of the decade and in the midst of a global energy storm, its chief executive, Maarten Wetselaar (Leiden, the Netherlands, 53 years old), grants his first interview since his landing — just three months ago—in the Spanish oil company after a quarter of a century in the British giant Shell. He is confident of a complete change in business focus, from fossil fuels to renewables. He sees in green hydrogen a golden opportunity, not only for the company he directs but also for Spain: “it is a real opportunity for its reindustrialization” -. Rule out a revolution fracking in Europe in the image and likeness of what happened in the US And it does not fear a shortage of diesel.
Ask. In your new strategic plan there is no profit forecast. How much do they aspire to earn in 2030?
Answer. It is true that we have not offered very detailed figures: we are not a listed company, so the interest of investors is less. But there are two important numbers to keep in mind: 8,000 million investment, 60% of them in sustainable activities. And there is another reason for not giving a very detailed breakdown: although we will spend that money on electric mobility, hydrogen and biofuels, the speed at which these businesses will develop is still somewhat uncertain. If we see that one is moving faster than another, we will change our approach. And if we see that everything is moving very fast, we probably want to raise that number, because we certainly want the leadership in all of them.
P. They say that all these investments will be self-financing. How?
R. So is. We do not believe that we need shareholder money to execute this investment program. The cash flow that we generate will be to finance this program, maintain the balance and distribute dividends to our investors. By the end of this decade our free cash flow will be quite high, because we will not only have our current assets, but also our new ones.
P. To make it clear: it will be the money from Cepsa’s current oil business that will finance this transformation.
He knows in depth all the sides of the coin.
R. Absolutely: exploration and production, refining… We try to maximize the value of our classic business and then we build green businesses with that money. There are transversal areas, but yes: the money that comes from the fossil will finance the growth of the green part.
P. Is this process easier with oil above $100, like now?
R. In the industry in general, this is true for reasons: because with high oil and gas prices it is easier for renewables to compete and because the fossil business is more profitable. This maxim applies less to Cepsa than to other companies, such as the frackeras in the US But still, yes: the effect is there.
P. They open the door to a sale of its Chemicals division, one of Cepsa’s great jewels.
R. We don’t close it. All options are on the table.
P. But today, what do you prefer?
R. We are just in the process of making a decision. It depends on several factors and we will take our time to make the right decision, because it is an important topic.
P. His plan is to install 7 gigawatts of wind and solar power in Spain by 2030. It is a lot: 7% of what the Government expects to have installed throughout the country by then. And you say that everything is for your own consumption…
R. We are large consumers of electricity, and we will be even more so: to generate green hydrogen, for example, a lot of electricity is needed. Another important part will go to electric mobility, where, of course, we will sell our energy.
P. Do you bet more on solar or wind?
R. Most will be solar, but to make green hydrogen we will need a mixture of the two because the electrolysers have to work as long as possible… And the sun and the wind don’t always coincide.
P. Does Cepsa’s plan include, in the future, becoming an electricity company?
R. Not specifically. Not because there is anything wrong with it, but because our strategy is more focused on green molecules: we believe that this is the biggest gap in the energy transition. There are already many people in Spain focused on green electricity, but the most difficult thing is to feed the sectors that today use fossil fuels. There the progress is less: technologically it is more complex and the capital intensity is greater. Solar panels are great, but many companies can do that. Making sustainable aviation fuel, on the other hand, is a complex chemical process. It is not only the most difficult part of the energy transition, but it will be a very competitive space.
P. When will they sell their last barrel of oil? And the last liter of gasoline or diesel?
R. The energy industry will continue to need oil for some time, because there is more demand than biofuels can cover. Also chemistry. So the world will probably need oil for a long time to meet demand. But the last barrel of Cepsa crude that won’t sequester carbon dioxide — that is, won’t have net zero emissions — will be sold well before 2050.
P. And when will your last gas station close?
R. I think we will stop selling gasoline [y diésel] throughout the 2040s, although many service stations will have stopped doing so before then. In Spain it will not be possible to register internal combustion cars from 2035, so that entire fleet will be off the road in 2040 or, at the latest, 2045. It will be the opposite of how it is now: it will be possible to charge everywhere, but diesel and gasoline will be increasingly difficult to find.
P. Is the high price of oil good news for the development of the electric vehicle?
R. Yes, I think it helps, although electricity prices are also high at the time. But it is not just a question of price, but of energy security: green energy is fundamentally local, while fossil fuel is imported. That will give a boost to electric mobility.
P. When will the price of oil drop?
R. The market will continue to be tense. Barring another demand shock, prices will remain high, in the $70-$130 range.
P. It is a very cyclical market. Will today’s high prices increase supply, as in the past, or will companies in the sector simply focus on other businesses, such as renewables?
R. Rather the latter. In previous cycles, many people would have said: “It is time to explore and develop projects”. Not today: those same companies are keeping their production stable or even reducing it, and that is something that is not changing due to the current price signal. Perhaps the only exception is the shale [más conocido como fracking] In U.S.A.
P. There is a certain contradiction in Europe regarding the fracking: it is rejected, but at the same time a good part of the gas and oil that is being imported from the US to replace that from Russia comes from hydraulic fracturing. Do you see a second chance for your development on the continent?
R. I do not believe it. It has been tried several times, and just seeing what the industry is like fracking in Texas, it is appreciated that it is not possible to do something similar in Europe.
P. He doesn’t see the point, then, in investing in fracking in Europe.
P. What do you think that only three companies, Repsol, BP and Cepsa have to supplement the reduction of 15 cents per liter of fuel provided by the Government with an additional 5 cents?
R. It is a very temporary measure, at a time of crisis. Last week we announced a price drop for our customers and what the Government is doing is generalizing them. We understand this, as a temporary measure, and we understand the damage that consumers and businesses are suffering.
P. Don’t you have room to reduce your margin and thus lower the price to your customers a little more?
R. The Spanish market is quite competitive, with some large companies but also a growing number of smaller players competing, above all, on price. So the margins are not that wide. The measure we have taken is exceptional: it tries to help the country in a limited period of time, but it cannot last forever.
P. Concerns about diesel supply have grown in recent weeks.
R. There is enough diesel in the world. If it does not come from Russia, it will come from the Middle East or Asia: I am not worried about the lack of this molecule. Also, there are reservations. Prices will remain volatile, but a shortage is highly unlikely. Spain has more refining capacity than many other European countries and does not buy much diesel from Russia.
P. One of the things that this crisis shows is the absence of a common energy policy in the EU. Will this change?
R. The world has changed, especially from a supply perspective, with energy independence and security moving from low on the agenda to being one of the top three priorities. A lot of energy will be produced locally and without emissions.
P. The promise of green hydrogen has grown exponentially in recent years. When will it be a reality?
R. We will still have to wait until the end of this decade for it to be competitive in price, both compared to that from other sources [fósiles] as compared to diesel or gas. But Spain can generate the cheapest green hydrogen in Europe.
P. What opportunities open up?
R. If someone wants to open a factory in Europe, will they do it in Germany or in the south of Spain, where green hydrogen will be cheaper than anywhere else? Renewables and green hydrogen are a real opportunity for the reindustrialization of Spain: in previous waves of industrialization, the cheapest source of energy was not here. But now yes.
P. Interconnections with the rest of the continent will also be needed.
R. Yes. If you want to take advantage of its full potential, you need a tube that connects the south of Spain with Germany. Hydrogen requires slightly higher grades of steel than gas, but if you choose the right steel [el tubo] could be used to carry both. It will be crucial: the sooner it is built, the sooner we can ensure that we scale the hydrogen industry to the size of the opportunity. [que tiene enfrente]which is much larger than the four gigawatts that the government has announced.
P. Will the emergence of hydrogen advance the high price of natural gas? It’s your closest competitor…
R. Yes absolutely. Both gas and oil: when crude oil costs 50 dollars, green hydrogen has much more difficult to compete than when it costs 150. The higher its price, the more competitive green hydrogen will be.
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