CERAWeek by S&P Global 2023: The path to a sustainable energy future
(WO) - The energy industry is in transition, and the race to net zero is well underway. Operators and oilfield service providers understand that successfully reducing GHGs is a monumental challenge that will take the collective brainpower and cooperation of industry and the world’s political leaders. Since the launch of the ET initiative, the actual cost and technological complexities of achieving net zero are better defined. In a panel discussion at CERAWeek by S&P Global, industry experts discussed the challenges facing the industry and outlined the opportunities that lie ahead.
During a presentation titled Dual challenge: Accelerating energy transition while ensuring energy security, Baker Hughes Chairman and CEO Lorenzo Simonelli, PETRONAS President and CEO Tengku Muhammad Taufik, Linde CEO Sanjiv Lamba and S&P Global Senior V.P. Atul Arya discussed the major problem surrounding the uncertainty of the pace of technological development/deployment and the time required to reach scale.
The discussion stared when Arya asked Taufik about his vision for a balanced and affordable energy transition in Asia. “This is a multiple faceted problem and is not an easy subject to unpack unless we apply systems thinking. Asia has multiple economies with different degrees of maturity,” Taufik stated. While governments have a fiscal responsibility to reduce energy subsidies and make energy affordable for all, he continued, they also have an explicit obligation to allow economic activities to continue, particularly after coming out of the pandemic.
“As for energy security, Asia is resource-rich, but compelling the region to pursue carbon reduction initiatives will require a different approach,” explained Taufik. “Using a purely Anglo-Saxon approach is not going to work. Because in Asia, not all governments are primed or able to replicate what has been accomplished in the U.S., nor do we have immediate responses to the carbon adjustment mechanisms being sought by Europe. But we are not climate deniers, and every government that I have spoken to has ambitious nationally determined contributions (NDC) as outlined by the Paris Agreement.”
However, there is no silver bullet, and the transition in Asia will be based on a multi-station and multi-speed approach, Taufik continued. “Not every country is in a position to take on these priorities at the same time and efficiently manage inflation, energy security and energy access. However, I do believe the ET will be faster than some of the other energy mix changes that have taken place. But it is going to take decades. So, I think we've got a lot of low-hanging fruit, and we have some good technologies available to enable us to lower emissions. And I think we've got to stop talking about fuel source and focus on emissions. because we're going to be using hydrocarbons for a long time.
Role of hydrogen. Next, Arya asked Linde CEO Sanjiv Lamba about the role hydrogen will play in the energy transition. Hydrogen has been a viable business for decades, Lamba stated. The industry, he said, has become infatuated with attaching various colors to different types of hydrogen. “I’m amazed as to how a small colorless molecule gets a whole range of rainbow colors, from blue, green, grey, pink and turquoise,” observed Lamba. “But this nomenclature is misleading and misguided. As we think about decarbonization, we need to think about the development of a hydrogen economy. The main goal is to produce low-carbon-intensity hydrogen, and make it available as feedstock for fuel chemicals, or whatever the need might be. This has to be our main focus. “So our long term goal is to ensure we can get low-carbon-intensity hydrogen in the best form possible,” Lamba continued.
And hydrogen is here to stay, and it has a lot of properties that work exceedingly well for a number of applications. “We will bring an entire suite of blue hydrogen projects to market,” promised Lamba. “I believe green hydrogen or zero-carbon-intensity hydrogen is something for the future, but we are seven to 10 years away on a technology roadmap to get to a point where it's cost competitive and available at scale for us to do projects that are meaningful.”
Next, Arya asked Baker Hughes CEO Lorenzo Simonelli about his perspective on hydrogen and the role his company plays in producing and delivering product. “So definitely, hydrogen has been around for a long time,” Simonelli stated. “Wherever you look at the pre-production loop, we've had compressors since the 1960s and various other technology applications. So yes, hydrogen will be a long-term play and Baker Hughes is investing heavily in its development. Also, turbines available on the market today can run 100% on hydrogen. Hydrogen will be developed in phases, as discussed, but we should not lose focus on the benefit that natural gas brings, If properly managed. Natural gas and LNG have been instrumental in reducing emissions in the U.S. and Europe.”
The hydrogen discussion shifted back to Taufik, who stated that “ technology development is going to take a better part of a decade. But I do not want these steps to be berated or discouraged. Because they are good steps. PETRONAS is moving forward with a CCS blue hydrogen. This will encourage the banking industry to start thinking that hydrogen is part of the solution. The situation is not perfect, but it's a good start. And I think what Lorenzo mentioned with regards to natural gas is a good point, because PETRONAS is one of the largest LNG exporters, and it is going to be part of the solution as Asian and other regions strive to lower GHG emissions.”
CCUS. Arya then asked the panel to share their perspectives about the progress of the various carbon capture, utilization and storage projects. Taufik took the lead, stating that PETRONAS, working with SLB, has the capability to take CO2 and apply the molecule in alternative manners. “So, we've got technologies that enable us to make CO2 into carbon black,” added Taufik. “These are numerous uses for the molecule. We are also working to capture CO2 directly from the atmosphere. Direct air capture is still a relatively recent technology, but it is rapidly advancing.”
Deploying ET technologies. Simonelli continued the discussion, stating that “there are multiple technologies available that we're not actually deploying today. Between 2019 and 2022, Baker Hughes reduced its carbon emissions 23%. A recent analysis suggested that if companies use technologies available today, the industry can meet 40% of the Paris Climate accords. So, we need to use all the technology we have today. I am very confident that new technology coming on stream will be available soon and help further reduce GHG emissions.
Collaboration. Arya then shifted the discussion to how important it is to combine technologies from companies with different skill sets. Linde’s Lamba started the discussion, stressing the importance of collaboration. “One of the things that is clear to me is that partnerships are very important,” he noted. “Companies need to understand how they can have strategic complementary skills and capabilities that ensure the entire value chain is efficiently managed. We are very blessed with a number of our collaborations; I have a good time. We recently launched an entire digital infrastructure around oilfield services. We are now working with a U.S. company, down in Argentina, and we are also looking at opportunities in Colombia.
Governmental policy. The final part of the panel discussion focused on the role of legislation. PETRONAS’ Taufik summarized his perspective on how governments view their role in the energy transition. “It is probably right to say that governments across the world want to privatize the energy transition; they want to support it and there is clearly no lack of intent,” he analyzed. “However, it is critical to set policy that results into something that is meaningful, which is yet to materialize. The U.S. stands out as a landmark by providing the required momentum to ensure the energy industry looks for solutions, like the Inflation Reduction Act. I was happy it was signed so quickly, as it is an important incentive-based legislation guideline that other countries can follow. It is also simple to understand and implement,” Taufik said.
Wrap-up. Arya put a wrap on the discussion, stating, “I'm going to ask one final question, what is the role of oil and gas in the energy transition? There are people out there that want to get rid of hydrocarbons very quickly, including natural gas, because of methanol emissions.” Taufik emphatically stated, “to do away with oil and gas at this point in time is absurd and illogical.”
The panel concluded that the industry is facing significant challenges, as we transition to a more sustainable approach. But all were optimistic about the progress being made and the new business opportunities that lie ahead. With collaboration, new technologies and supportive policy frameworks, the industry is making significant progress in reducing carbon emissions, in the push to achieve net-zero.