In order to react to criticism from society, companies have recently taken several initiatives, some of which are quite interesting and should be mentioned. For example, there is the Oil and Gas Climate Initiative, which has grouped together several international and national oil companies. This initiative is pursuing three major strategies. One is reducing the carbon footprint of the energy value chain. The second is accelerating low-carbon solutions. The third is enabling what they call enabling circular carbon model. What does this mean? In the next graph, you will see these three different targets represented on the left of the slide in a short description of each, at the center you see what is meant by reducing the carbon footprint of their operations. This is done by limiting the energy input, which is needed to explore and produce oil itself, limiting emissions of methane in the atmosphere and also the flaring of methane. So flaring and venting of methane in association with oil production must be limited, and this is recognized. The companies have established specific targets that they intend to meet collectively in order to reduce the carbon footprint of oil and gas production, and this would be a major step forward. On the right hand side of the slide, you see the meaning of working for a circular economy. This basically means instead of emitting carbon into the atmosphere, so emitting CO2 into the atmosphere, moving in the direction of capturing CO2, both in the operations of the companies themselves. So both at the stage of producing oil and gas which is already taking place and also at the stage of utilization of oil and gas, so in power plants, in cars, and so on and so forth, and capturing CO2 and either storing it, sequestering it in deep geological formations or re-utilizing it for the production of useful products, which is a possibility. So the idea is that we might be able to continue using oil and gas and coal for that matter, but we would need to capture CO2 so that it is not emitted into the atmosphere and becomes a factor in climate change. When we go to the numbers and we look at how much of their investment budget companies effectively devote to alternative energy sources, we see that this percentage is really very limited. We are talking about a maximum of five percent of the total investment budget which companies devote to alternative energy sources. This is not surprising because their main job is to explore and produce oil and gas. So oil and gas activities that are highly capital intensive and inevitably much of their investment budget ends up being devoted to their traditional activity, this is viewed as very disappointing by many outside observers. But one should also take into account the fact that international companies do not have any special advantage in investing in some of these areas. They are not especially good in developing solar or wind. They may be good and have a special knowledge in developing carbon capture and sequestration, in developing bioenergy because in the end, bioenergy means producing biofuels which are similar to oil and gas. But in other areas, they have no special strength. If we look at research and development that is devoted to low-carbon technologies, we see that the percentage is even smaller of the total research and development expenditure. It is in all cases less than one percent of total research and development expenditure. Some international oil companies have been doing, they've been shifting their investment from oil to gas. This is because while there is a possibility that oil demand may peak and the use of oil might need to decline, there is basically no scenario in which we have a significant decline in the use of gas. Natural gas is preferable to all other fossil fuels because of its more limited carbon emissions. So companies have been shifting from oil to gas and consultancies have been working on measures of resiliency for individual companies, and how much they are oil intensive or gas intensive is one of the key considerations. As you can see in this slide, which comes from a report recently published by a consultancy called CDP that engages in an analysis of oil companies action with respect to climate change, some companies, those that are represented in the bottom left quadrant, are considered to be more resilient to climate change while others are more exposed and would be losing more heavily if definite action is taken in order to achieve the targets of the Paris Agreement. The next graph also shows you how the mix between oil and gas works out for different companies. You will see that some of the companies are essentially gas producers. This is the case of Gazprom to the extreme left. Other companies are both oil and gas producers but the ratio to which they engage in gas versus oil differs, and some of them notably Shell or Total or Eni are more engaged in gas or produce more gas than they produce oil. Companies are not subjected to pressure from environmental groups only, they also are under pressure from financial analysts. Financial analysts have been preaching the gospel of returning value to shareholders, which is very similar to maximizing the value for the profits and the returns for shareholders. They are calling companies to increase dividend payments and engage in schemes to purchase their own equity. So devote money not to investment in oil and gas or in alternative energy sources but devote money to purchase their own shares from the market. So that the price of their shares will go up and the number of outstanding shares will be reduced. Another mantra has been investment discipline, whereby companies are told that they should not invest in expensive projects or projects whose maturity, whose benefit is very much delayed in time, but focus on those projects that are low cost and promise quick returns. So it's a very short-term approach that is being pushed towards the companies. In contrast, at the opposite end, the International Energy Agency has expressed a preoccupation that insufficient investment is going into upstream oil and gas. This may cause a spike in oil prices and gas prices in the 2020s, and this would be negative for global growth and in the end probably negative also for the energy transition although it would encourage reduction in demand. So it should be kept in mind that oil fields which are currently in production are naturally declining. Every year, some production is lost because the resources progressively exhausted. At the same time, demand, at least for the time being, is growing. As we have seen already in a previous unit, it is expected to keep growing in most scenarios at least for the next 20 years. So the danger of insufficient investment is real. Companies, therefore, face huge uncertainty. On the one hand they're told they need to invest more to meet demand and demand is growing and they need to invest more also in alternative energy sources. If they believe that the Paris Agreement targets will be implemented, they would need to shift their investment to other projects completely. But this is not what is happening in reality, and so they don't know in which direction they should go. How fast will the world decarbonize? That's a question that companies need to ask themselves, and it is crucially important for them, but no clear answer is available.