The call for energy transition has continued to gain global traction yet the world faces the challenge of meeting growing energy demand. While the demand for energy remains high across regions of the world, the pressure to cut greenhouse gas emissions to reach carbon neutrality by 2050 is also high.
Cutting emissions has therefore never been more important than now as the world faces the greatest existential crisis in recent history, which is climate change.
To tackle the severe impacts of climate change, decarbonisation and the adoption of renewable energy are some of the solutions being widely canvassed. In fact, the increased investments in renewable energy globally have given rise to serious concerns by the hydrocarbon industry players.
So, does the call for energy transition signal the beginning of the end for the hydrocarbon industry? Do hydrocarbon companies have anything to fear about?
According to the Executive Director, the International Association of Oil & Gas Producers, Iman Hill, the hydrocarbon industry is expected to play its part in taming the monster called climate change.
He insisted that the ‘energy transition will be severely hindered without the involvement of the oil and gas industry’s engineering capability, project management skills and investment power.’
Though nobody can stop the global energy transition, oil and gas companies have nothing to worry about because the energy transition won’t happen overnight.
Demand for oil and gas is expected to remain significant for the foreseeable future throughout the transition, which is expected to follow a gradual course.
There will be a steady demand for fossil fuels decades from now and global leading oil and gas executives and industry giants are all affirmative about this.
For instance, the Chairman, Oil & Gas Climate Initiative, Bob Dudley, at the 23rd World Petroleum Congress in Houston, Texas, said, “There will be oil in 2050, 2075, and further out. I know a lot of people want to transition away from it very quickly. But, when you think about an electric car, 20 per cent of it comes from oil in the form of plastics. It will be around, just not maybe in the same volume.“
Similarly, the Chief Executive of Halliburton, Jeff Miller, believes that there would be steady oil and gas demand long into the future saying energy transition to alternative (cleaner) sources would take place in parallel.
According to the Minister of Energy, Alberta, Canada, Sonya Savage, “every credible forecast for the global energy mix shows that oil and gas are going to continue to be used for decades. In fact, it’s going to dominate the energy mix.”
However reassuring these predictions may be, oil and gas operators in Nigeria and elsewhere in the world must readapt and respond accordingly to survive.
This is so because the oil and gas industry’s survival will largely depend on its ability to adapt to environmental changes through innovation and the adoption of technologies. Dudley insisted that energy demand would keep the oil and gas industry relevant but only low-cost and cleanest producers would survive.
According to Accenture Chief Executive, Julie Sweet, the hydrocarbon sector needs to transform and become more innovative while deploying technology to “get better margins to make a lower carbon future for hydrocarbons.”
Miller, the Halliburton boss, noted that the energy industry, particularly the high-tech services, would play a vital role in the emergence of new, currently non-existent value chains of the sustainable energy future. So, technology is the pathway for oil and gas operators navigating the energy transition landscape.
Leadership is also critical and Sweet, the Accenture boss, submitted that leadership would play a critical role in the survival of the hydrocarbon industry players amid the global energy transition storm. If oil and gas companies must deploy innovative solutions and tailor-made technologies that will ensure profitability and a lower carbon future for their operations, leaders must develop new skills and fresh ways of doing things.
“The nature of the transformation that we have to do in terms of digital and using technology does require different leadership skills, it requires a different culture,” she explained.
Natural gas is being touted as the game-changer in the energy transition milieu because it is capable of helping to reduce carbon emissions in that it burns cleaner than coal and oil. As such, hydrocarbon sector operators that do not want to be left behind by the energy transition train must prioritise gas projects, at least, in the long term. Global natural gas demand is expected to increase by 38 per cent between 2020 and 2050. This, of course, explains its importance to the global energy transition goals.
Leading global energy players understand this and are already responding. For instance, half of TotalEnergies’ production growth between 2020 and 2030 will come from liquefied natural gas and the other half from electricity essentially from renewables, according to the Senior Vice President, Strategy & Business Development, TotalEnergies E&P, David Mendelson.
Mendelson said this was in line with the company’s energy transition plans. He explained that the company plans to make $13bn to $15bn investment per year through 2025 in renewable, electricity and Liquefied Natural Gas. The company also hopes to cut greenhouse net emissions by 40 per cent by 2030.
If the leading players like TotalEnergies, Chevron and ExxonMobil are exploring opportunities thrown up by the energy transition movement, what will be the excuse of local hydrocarbon operators in Nigeria, for instance?
With 206 trillion cubic feet of gas reserves discovered accidentally during oil exploration and the target to grow its reserves to 600 trillion cubic feet, Nigeria is more of a gas-producing country than an oil-producing country and gas is expected to play a vital role in the country’s energy transition arrangement.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, while addressing a panel at the 23rd World Petroleum Congress, told the world that Nigeria was looking at natural gas to drive the energy transition. He, however, said the country would continue to drive investments in the upstream sector of the industry while expressing confidence that the Petroleum Industry Act would help unlock investment opportunities in the oil and gas sector.
This suggests that while the country is not unmindful of the global energy transition target, the hydrocarbon industry will continue to remain attractive in the country.
The African Export-Import Bank had decided to commit $5bn to upstream development in Nigeria following the passage of the Petroleum Industry Bill into law.
Nigeria’s gas holds huge opportunities. For instance, utilising the country’s recoverable gas reserves can support 6.5 million jobs and produce $18.3bn in annual gross value addition.
Despite the privatisation of the power sector by Goodluck Jonathan’s administration, Nigeria is currently plagued with chronic energy poverty. Ninety-two million Nigerians are without access to electricity. So, it’s a no-brainer that gas and power hold huge opportunities for Nigeria’s oil and gas investors. Also, most of sub-Saharan Africa suffers a similar fate in terms of energy poverty and this holds regional/sub-Saharan African opportunities for Nigerian players. There is a future in renewables and the hydrocarbon industry must tap into it to drive the energy transition and make the dollars involved.
The global market for clean technologies could exceed $23tn by the end of the decade and this holds massive opportunities for oil and gas companies in the areas of geothermal production, carbon capture, storage and usage, and advanced nuclear logistics, the US Deputy Secretary of Energy, David Turk, told attendees at the World Petroleum Congress.
To guarantee energy transition while remaining competitive and profitable for the foreseeable future, oil and gas players must also invest in research and development.
Collaboration is equally vital in tackling the challenges of the energy transition. Industry operators and all other stakeholders must collaborate to provide the necessary fillip needed to go forward from here.