July 2022

Executive Viewpoint: The solution to our energy crisis does exist

Faced with oppressively high prices at the pump and escalating energy costs that negatively impact our daily lives, one must wonder: what can be done to rectify this situation?
Jeremy D. Thigpen / Transocean Ltd.

Faced with oppressively high prices at the pump and escalating energy costs that negatively impact our daily lives, one must wonder: what can be done to rectify this situation? 

It is undeniable that we face an energy crisis—a crisis compromising our standard of living, introducing serious geopolitical risks, potentially threatening the security and sovereignty of countries, and limiting economic opportunities worldwide, especially for developing nations. Years of underinvestment in oil and gas reserve replacement created this pending crisis, as energy companies faced unrelenting pressure from investors to maintain capital discipline, and public and political cries to transition from hydrocarbons and pursue carbon neutrality at any cost. 

As a consequence, hydrocarbon demand has persistently exceeded supply, depleting inventories globally. While this is unsustainable, we can put an end to this crisis, if we take immediate action. The solution is relatively straightforward: safely and responsibly drill for, and produce, more oil and gas. Unfortunately, while the solution may appear simple, implementing it is a challenge, given investor pressure and our politically polarized landscape. 

But it is imperative we accept this challenge. According to the U.S. Energy Information Administration, global consumption of petroleum and liquid fuels will average 100.6 MMbpd for all of 2022. This is up 3.1 MM bpd from 2021’s level. And in 2023, global consumption is expected to increase another 1.9 MMbpd to average 102.6 MMbpd. 

Role of oil and gas. It is clear that oil and gas will remain a significant part of the energy mix for the foreseeable future, and steady investment is needed to offset declines in existing fields. Without additional drilling, non-OPEC production will decline by 9 MMbopd by 2025, and 20 MMbopd (or 41%) by 2030. Additionally, according to Rystad Energy’s 2022 review, global recoverable oil now totals an estimated 1,572 Bbbl, which is a drop of almost 9% since last year, or 152 billion fewer barrels than 2021’s total. Rystad says the U.S. offshore sector was the drop’s biggest contributor: “20 billion barrels of oil will remain in the ground, largely thanks to leasing bans on federal land.” 

Unfortunately, the landscape does not appear to be improving. The industry’s latest challenge comes in the Department of Interior’s proposed five-year program for federal offshore leasing. Even with energy demand expected to increase, the draft plan for 2023 to 2028 offers up to 11 possible lease sales in two outer continental shelf (“OCS”) planning areas, “including the option of zero lease sales.” Compare that to the final plan for 2002 to 2007, which included 20 lease sales in eight OCS planning areas and the 2012 to 2017 plan, which included 15 lease sales in six OCS planning areas. 

American Petroleum Institute’s Senior Vice President of Policy, Economics and Regulatory Affairs, Frank Macchiarola, said as Americans face record high energy costs and the world seeks American energy leadership, the draft plan “leaves open the possibility of no new offshore lease sales...” The substantial gap between programs could leave “U.S. producers at a significant disadvantage on the global stage” and put “our economic and national security at risk,” he said. 

Reliability. Oil and gas have been, and remain, the most reliable, affordable and transportable sources of energy in the world. Misunderstanding how much the world depends on oil and gas has led to irresponsible (or ill-advised) regulation, unnecessary bureaucracy and funding deficits for energy companies. The effects are apparent, and they result not only in the supply/demand imbalance—leading to higher prices at the pump—but also impede investment in, and deployment of, technologies needed to achieve meaningful carbon footprint reductions. 

Wall Street investors have been discouraged from investing in traditional energy companies, due to pressure from politicians and regulators, and based upon the policies of financial institutions, which are, instead, pouring money into alternative energy investments. Unless capital investment in companies offering traditional energy solutions increases significantly, energy companies may not be able to meet the growing global demand for oil and gas. 

Availability. Limiting the availability of oil and gas would cut off many of the world’s poor from heating their homes, increasing crop yields and accessing transportation. Already, higher gasoline costs, alone, are causing lower-income families to decide between transportation to work or food and other basic necessities, the costs of which are also increasing. 

While planned emission reductions across the U.S. and Europe are important, they are negated by emission increases in other nations. Regimes like Russia and China have shown their geopolitical ambitions outweigh their climate objectives. The energy expansion beyond hydrocarbons must be considered, with an understanding of the importance of security of supply and economic competitiveness. 

To reduce our global carbon footprint, we collectively need to develop and deploy all energy sources and technologies, without ideological bias. We need energy sources in solar, wind, natural gas, hydro, oil and nuclear, or we will be pulled into energy crisis after energy crisis, at an ever-increasing cost to the global population, our economies and our security. 

Employing hundreds of thousands, the energy industry, with support from regulators and investors, can provide energy security. Our advocacy efforts are crucial, and we should do everything possible to further the public’s understanding of the benefits of oil and gas and the essential role that energy plays within national and global economies. 

The solution to our energy crisis does exist.  

About the Authors
Jeremy D. Thigpen
Transocean Ltd.
Jeremy D. Thigpen is Chief Executive Officer of Transocean Ltd. He joined the company as CEO in April 2015, and served as President until February 2022. He previously served as Senior Vice President and Chief Financial Officer at National Oilwell Varco, where he spent 18 years. During his tenure at NOV, Mr. Thigpen spent five years as that company's President of the Downhole and Pumping Solutions business and four years as President of its Downhole Tools group. He also served in various management and business development capacities, including Director of Business Development and Special Assistant to the Chairman. Mr. Thigpen serves as a member of the Board of Trustees at Rice University (since 2022), and he served as the International Association of Drilling Contractors’ Chair in 2022. He earned his Bachelor of Arts degree in Economics and Managerial Studies from Rice University in 1997 and completed the Program for Management Development at Harvard Business School in 2001.
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