In the oil and gas industry, it’s easy for the energy transition to be dominated by a charged debate: is it happening too fast or not fast enough? Oil and gas companies, caught between two sets of stakeholders, can sometimes find it hard to look beyond the tension, and the tightrope they feel they are walking. At other times, we can become paralysed by myths that are consciously or unconsciously stopping us from taking confident action.
We’re going to put some of these myths under the microscope, and see what opportunities and challenges the future actually holds, and how oil and gas companies will play a crucial role in it all.
Myth 01: The energy transition is insurmountable for the oil and gas sector
Before we look to the future, let’s consider our history. If you look at investments in our industry over the last 130 years, it’s been focused on drawing hydrocarbons from the subsurface, where there is inevitably a high degree of uncertainty.
This has made it a risky venture financially and, at the same time, it’s been a risky venture in terms of human safety. Live hydrocarbons are volatile, and if there are people around and failures occur, it’s very costly both financially and in terms of human life.
None of this has stopped us. Instead the industry gave birth to a sophisticated culture of thinking around risk management and process safety risk. The industry has led the way in our engineering and design, in our commercial decisions and our analysis. And we’ve always looked to maximise returns for the manageable risk.
With such a history in mind, it doesn’t make sense to look to the next challenge and call it insurmountable. The oil and gas industry made working with live hydrocarbons safe. And with the same expertise and dedication, we can make energy net zero in time.
Is it too expensive? Is it too much work?
More often than not, you’ll be surprised by the answer. We’ve seen first-hand how the ingenuity of engineers and designers can create solutions that exceed all expectations.
For instance, we were working with engineers in Trinidad to design solutions for tie-backs. When they were given strict perimeters – low carbon, high efficiency, low cost – the engineers quickly created minimum scope designs that didn’t need their own power.
It’s almost like they were waiting for permission. Their designs took CO2 emissions down from around 30 to 40 tonnes per 1,000 barrels to about three or four tonnes per 1,000 barrels.
Not only that, but their designs were also cheaper than the present solutions because of the absence of scope. The risk was also less because the whole solution would be less complex to execute.
Needless to say, this discovery changed the mindset of everyone working on the project. Although such developments won’t be possible yet in every country, there are plenty of regions and developments where, with the right expertise, new solutions aren’t only possible but recommended to reduce carbon emissions, costs and risk at the same time.
Myth 02: Renewable energy requires different expertise
The renewable energy sector is often thought to be a simpler affair than oil and gas. The perception is that it’s simply a matter of buying high grade materials from Taiwan or China, assembling what you need for, say, wind or solar power, plugging it into the grid and using batteries for energy storage so we can provide energy security when the sun doesn’t shine or the wind doesn’t blow.
On face value, this sounds relatively simple compared to the act of getting live hydrocarbons from miles beneath the surface, refining them, and putting them through internal combustion engines. You might conclude that renewable energy is a different beast altogether.
But actually, many of the complexities are the same. Let’s say you want wind and solar to power an electrolysis unit at scale – 200MW, rather than the 10 or 15MW outputs that exist today. Or that you want to take e-methanol or ammonia to major shipping companies to decarbonise shipping. Or you want to work with hydrogen and need to handle very small volatile molecules. None of this is simple in the slightest.
The energy transition needs those who understand the molecular, who understand risk reduction, who can design complex systems that people can rely on for energy security in the decades to come. In other words, the best practices from the existing hydrocarbon energy world will be needed to make a new renewable end-to-end system successful.
That’s even before we consider carbon sequestration and carbon capture. Here it’s vital for us to have engineers who understand what happens to carbon dioxide under pressure as a liquid. Putting carbon underground is every bit as complicated as getting it out in the first place, and we’ll need multidisciplinary experts in the oil and gas industry to utilise everything they know.
Myth 03: The energy transition is a startup’s game
Right now many of the manufacturers, electrolysers, and startups in the renewable energy industry aren’t making money, and people are naturally asking: why take the investment risk?
Nevertheless, someone has to take the risk, and so they need a way of taking the broader operation forward. That will require people who can deal with risk management, risk reduction and complexity. Whether we’re talking about how to secure enough iridium for the electrolysers or how to hyperscale e-methanol production from wind and solar, this is not just a task for the ‘new guard’. It’s also a task for old and new companies to collaborate on together.
It’s going to be especially important to know how to integrate the wider systems. And that’s the kind of work that international oil companies have been doing for decades. Just recently a startup in Germany were exploring how they could decarbonise shipping using e-methanol. To achieve this they needed to draw on the same system integrated of skills traditionally used to consider oil field designs and analyse commercial opportunities across the globe.
Myth 04: It takes a long time for us to adapt
As a rule, human beings tend not to like change, and yet in a Darwinian-fashion it is those who are most capable of changing and adapting who thrive and survive.
There’s no doubt that the energy transition will require effort but there are certain elements we can take action on immediately. For a start, there are quick wins such as the containment of methane emissions, which not only creates a positive impact environmentally but generates capital at the same time.
Other challenges are daunting but our governments and industry need support, not naysayers. For instance, the UK needs 50million tonnes of CCUS per annum to reach net zero emissions. The good news is the UK Government recently confirmed financial support for a first project in NE England at Teesside and a second in NW England. These projects will capture between c. four illion tonnes a year each initially, but have growth capacity to c. 10million tonnes per annum each.
Nothing will happen without leadership
And, while all humans are leaders, the structures of our organisations can cause people to view themselves in other terms. Their curiosity can become stunted. Yet when we are given permission to all be leaders, what’s possible is astounding.
At the beginning of the Ukraine war, the national grid in Germany told the government they couldn’t handle the sudden change. They couldn’t move energy efficiently from Denmark, the Netherlands and offshore Germany. The grid could only offer 2-3% flexibility. The German government asked how much they needed to rectify it and provided around significant funding (Euro >1Bn). Now, just over a year later, the grid can provide much greater flexibility of >50% to deal with supply fluctuations.
We need those who can ask the right questions, we need the leaders in every organisation to act. We don’t need myths. The energy transition is possible and it requires everyone – incumbent Energy companies, startups, new thinkers and longstanding experts – to reduce the risk of projects, design solutions and create energy systems that we can rely on for a net zero future.
To learn how Rockflow can support your organisation, take a look at our Energy Transition Services. Or for more from our experts, see our articles on How an advisor can unblock a stuck opportunity and How upstream O&G companies can navigate disagreement.