The energy transition: Challenges and opportunities
The energy landscape is rapidly evolving. We live in a world that requires more energy with less emissions, challenging the fundamentals of our operations. At the same time, global trends and events have highlighted the need for energy security and a more diverse energy supply. Transforming the world’s energy mix into one that can meet demand safely, securely, and reliably will require us to balance near-term demand growth with transition objectives. We can’t choose one path; we must focus on both decarbonizing oil and gas today and innovating the new energy systems of tomorrow.
In the short and medium-term, it is critical that we continue to invest in oil and gas production to meet global demand. Today, fossil fuels represent 79% of the total energy supply—more than half of which is oil and gas—and demand growth is outpacing the speed of renewable or low-carbon energy capacity. To meet demand, we foresee double-digit capital investment growth in the upstream sector for years ahead, with a strong focus on decarbonization and building a lower carbon energy system. These efforts will be essential, as upstream, midstream, and downstream operations account for more than 8% of global greenhouse gas emissions.
Net-zero creates new opportunities. In the longer-term, as new energy systems become capable of replacing demand growth, and with the goal of achieving net-zero emissions by 2050, investments in oil and gas are likely to plateau and eventually decline. As an industry, we shouldn’t view this as a threat, but rather as an opportunity to leverage our expertise and innovation to drive solutions for the future. There is incredible momentum around the energy transition, and plans like the Inflation Reduction Act in the U.S., RePower EU in Europe and similar vehicles in many other countries are providing the incentives needed to transition our operations while delivering value to our stakeholders. This is a chance for our industry to make operations cleaner by investing in technology, such as carbon capture, utilization and sequestration, and leaning into new energy systems aligned with our existing expertise, such as hydrogen and geothermal.
And while I’m excited by the opportunities ahead; I’ll be the first to admit that they won’t be easy to achieve. The energy transition is the most complex challenge ever contemplated or attempted in the history of our planet, and it can’t be solved alone. It will require new and diverse investments, collaboration, and support across all energy systems, and the energy industry must be a key contributor.
As we pursue a successful and balanced energy transition, I see three imperatives that will drive our progress: 1) Digital technology; 2) Cross-disciplinary collaboration; and 3) Energy industry leadership.
Digital technology as an enabler. One of the biggest misconceptions I hear is that technology is still years away from contributing to a meaningful reduction in oil and gas emissions. Within our industry today, new digital capabilities are driving competition, increasing productivity and innovation, and leading to reduced carbon emissions, Fig. 1.
We have already seen this make a significant impact in upstream, midstream, and downstream oil and gas production and we are just beginning to understand how faster computation capabilities and automation using the Internet of Things can help to enhance operational efficiency.
As we look to scale digital solutions across the industry, one of the biggest challenges will be the availability and compatibility of data. Our industry has always operated using discrete hardware, software, and workflows with limited connections. Now, with the transition to the cloud, we have the computing power to engineer performance and the technology to capture, assess, and act on data to improve sustainability and transparency.
One area where SLB is leveraging these digital advancements is toward our goal of eliminating methane emissions. Through our SLB End-to-End Emissions Solutions offering, we are working with customers to integrate multi-source methane emissions data into a single digital solution that can measure the full impact of their operational footprint and build the most efficient strategies for emissions reductions and reporting goals.
While there are clear benefits of digital technology in our industry, scaling meaningful solutions will require new ways of working. We must develop standardized and open data protocols that improve transparency, enable innovation, and support the rapid deployment of solutions and the interoperability of technical systems across the full scale of the industry. And we must foster an ecosystem of collaboration, where digital partners, service companies, operators, regulators, and investors work together to maximize performance and minimize emissions. Digital and data present massive opportunities for delivering more sustainable operations, but it won’t happen on its own; collaboration will be critical to our progress.
Collaboration across industries. With the size and scope of the energy transition, meaningful solutions won’t be found in silos. The future of our industry lies in collaboration—not just within energy, where taking a new perspective on how we work together can accelerate the decarbonization of our operations—but in partnerships with other industries that can improve the speed to innovation and impact all of us. We can’t view the transition as a zero-sum game with winners and losers, instead we must consider this a chance to leave a lasting impact on the world for generations to come.
Moving forward, we must step up cross-industry collaboration, which can only be fully accomplished with a mindset of partnership and alignment throughout the entire value chain. Industries must share knowledge and work toward solutions together, combining domain expertise and creating mutual value much faster than can be achieved in isolation. I have seen this firsthand through SLB’s partnership with Microsoft to offer scalable data management to oil and gas systems, increasing the ability to measure performance and optimize operations efficiency throughout the value chain. The innovation and ideas that stem from partnerships like this will be essential for the decarbonization of hard-to-abate industries.
And while there are many opportunities to pursue, companies, regulators, and investors must start by taking ownership of the items they can most easily control. Companies in the energy industry need to commit to reducing emissions and recognize the energy transition as a strategic business priority - if we aren’t willing to take these steps when times are good, when will we? Regulators must drive policy that encourages innovation to drive down cost and deliver affordability to a clean energy system - incentives are a good way to achieve that. And investors need to take a balanced approach, investing in clean technologies and decarbonization efforts - especially within hard-to-abate sectors of the oil and gas industry, new energy systems, and digital.
By changing our perspective and viewing this challenge as a mutual imperative, we can drive progress for a balanced planet in ways that aren’t possible alone. But for this to be feasible, the energy industry must be recognized as part of the solution and take a leadership role in the transition.
The energy industry needs to be a leader. Throughout the last century, the energy industry fueled growth, ideas, and progress for all of humanity; now it must fuel change. We have the expertise, motivation, and necessity to shape the energy transition toward a decarbonized future. But to move as quickly as we need to, the perception about what the energy industry, including oil and gas companies, can contribute has to change. We can’t be an afterthought or excluded from the discussion, we must be an active participant innovating solutions and driving progress because the world simply cannot meet growing demand without oil and gas for many years to come.
As an industry with significant global emissions, our biggest opportunity is that we can start to make a meaningful difference by improving our own operations first. We have the knowledge and reach to drive innovation and scale global solutions quickly. Rather than waiting for regulators to lead the way, we must show that we are willing to optimize our ways of working today as we invest in energy mix of tomorrow. At the same time, it’s important to recognize that we can’t solve this challenge overnight; we need to celebrate progress as we work forward step-by-step.
The effects of climate change are accelerating, and we must view the energy transition as a strategic priority; it’s not only the right thing to do, but also crucial to ensuring the long-term resilience of our industry. Together, we can lead sustainability through innovative technology, stronger collaboration and the commitment to lead the global energy transition.
Lead photo: Digital has always been in SLB’s DNA.
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