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Can oil and gas companies lead the energy transition?

Huge pressure is falling on oil and gas companies: from governments to investors, to environmentalists, there is a growing demand for decarbonisation. The latest ruling by a Dutch court which ordered oil major Shell to reduce its emissions by 45 per cent by 2030 is just an example. Oil and gas companies must adapt, must evolve, must change. A lot of imperatives that, however, cannot happen overnight.

Indeed, the oil and gas industry must reduce its CO2 emissions. What industry doesn’t have to? Agriculture, forestry and land use directly account for 18.4 per cent of global greenhouse gas (GHG) emissions. Energy use in buildings accounts for 17.5 per cent, followed by the transport sector at 16.2 per cent.

What if, instead of looking at the oil and gas industry as the biggest enemy, we involve these companies in the climate discussion and accept their efforts to transform their business strategies? As the International Energy Agency (IEA) put it: should today’s oil and gas companies be viewed only as part of the problem, or could they also be crucial in solving it? After all, as projected by the IEA, oil and gas will still provide 47 per cent of the world’s energy needs in 2040.

Oil giants’ promises and disillusions

No oil and gas company will be unaffected by the clean energy transition. They are all building strategies to minimise carbon use while also remaining competitive; they are supporting and expanding their portfolio in the renewable sector; and they are investing in new technologies like batteries, hydrogen and energy storage.

Let’s take into account two big examples. Shell’s target is to become a net-zero emissions energy business by 2050. Which means reducing emissions from its operations and from the fuels and other energy products it sells to its customers. It also means capturing and storing any remaining emissions using technology or balancing them with offsets. In the UK, Shell already provides hundreds of thousands of homes with 100 per cent certified renewable electricity. It also offers drivers access to more than 185,000 public electric vehicle charging stations in more than 35 countries. And, it is exploring ways to produce hydrogen using offshore wind power. Following the court ruling, Ben van Beurden, Chief Executive Officer at Shell, is feeling a “determination to rise to the challenge.”

Another oil giant, bp aims to reduce emissions from its operations and those associated with the carbon in its upstream oil and gas production by 30-35 per cent and 35-40 per cent respectively by 2030. It also aims to develop around 50 gigawatts (GW) of net renewable generating capacity and recently, it has developed plans for the UK’s largest blue hydrogen production, targeting 1 GW by 2030.

Yet, at the same time, these same companies keep investing in fossil fuels. bp and Eni renewed their commitment to continue developing the upstream sector potential of Angola. Earlier in April, bp announced the start of production from the Satellite Cluster gas field in block KG D6 off the east coast of India and the first gas-condensate reserves were found in an exploration well drilled on the Shafag-Asiman block in the Azerbaijani sector of the Caspian Sea.

The oil and gas industry’s paradox: it must not exist but it cannot disappear

“There can be no new investments in oil, gas and coal, from now – from this year,” commented Fatih Birol, the IEA’s executive director quoted by The Guardian.

So we are facing a little bit of a paradox. Oil and gas will still play a role in the next decades. But at the same time, they must change and stop doing what they do. Sure, the most important aspect of the industry’s transition is to not start any new exploration. However, stopping those currently in use could really change, and not in a positive way, how we live.

While we are deploying renewables and hydrogen technologies, it is not fast enough. Let’s think about hydrogen: compared to some years ago when this word was not even in use, we made some progress and we have built lots of electrolysers. Still, problems arise when it comes to electrons, storage and transportation. Thus, in the meantime, we need oil and gas. What if these industries disappear tomorrow?

As not the entire transport sector can be fully electrified, at least not in the short- nor medium-term, trucks, trains and planes would disappear together with the oil and gas industry. In those regions, like in Central and Eastern Europe, where electricity is mainly coming from coal there wouldn’t be light. Actually, there wouldn’t even exist wind turbines or solar panels as they are made of materials produced thanks to the oil and gas industry. The Canadian Energy Pipeline Association mentioned also things that are important in our daily lives and maybe we haven’t even thought about it: like toothbrushes or running shoes, latex gloves or disposable syringes used by doctors and nurses, our computers and our phones and so on.

Central and Eastern Europe’s perspective

So what is the right approach for oil and gas companies? Is the industry responding well to the challenges it faces? Other than the environmental aspect, Gottfried Steiner, Chief Executive Officer of the Central European Gas Hub believes that it is important also ensuring the security of supply to households and industry at affordable prices.

Gottfried Steiner, Chief Executive Officer of the Central European Gas Hub.

“It is also about the competitiveness of the European industry, in particular, the industry in Central and Eastern Europe, against its global competitors,” he tells CEENERGYNEWS. “We are well aware of that challenge. To decarbonise the sector, green gas and hydrogen will play a major role in the future energy supply.”

“The industry is also working on new technologies to reduce carbon dioxide emissions. Some reassuring technologies are explored such as converting plastics back to crude oil or new additives to reduce carbon dioxide in fuels.” 

Paweł Majewski, President of the Management Board of PGNiG. Courtesy of PGNiG.

Also, Paweł Majewski, President of the Management Board of Poland’s oil and gas company PGNiG agrees that European oil and gas companies are placing great emphasis on the development of renewable energy sources and alternative fuels in their strategies, gradually reducing investment expenditure in the upstream segment.

“PGNiG was, is and will remain a gas company, but at the same time we are adapting to the EU climate requirements, where natural gas was recognised as a transitional fuel,” he tells CEENERGYNEWS.

“Substitution of fossil fuels by alternative fuels is an inevitable and irreversible process, but at present, it is difficult to forecast when and to what extent. It depends on the strategy of individual companies and countries and the strategies for achieving climate neutrality over time are not the same.”

The role of gas in CEE

Natural gas in CEE has still a role to play in the decarbonisation process. At this stage, companies, investors and end-users need to have an alternative to a fully (and more expensive) clean energy source. In particular, by 2030, a significant reduction in CO2 emissions can be achieved by the switch from coal to gas and the uptake of low-carbon gases into the existing gas infrastructure. By 2050, the gas infrastructure will serve as a valuable asset for the achievement of the EU climate goals, since it is able to integrate renewable gases like green hydrogen and biomethane and thereby can guarantee their transport and storage.
“Natural Gas will play an important role in the energy transition,” Mr Steiner points out. “However, its future share in the energy mix is still debated. Especially in the CEE region, natural gas has an important role in providing affordable energy to households and industry. It is important to keep this in mind in the decarbonisation path.”

“Blending of hydrogen and green gas in the gas grid will be crucial: in the short term to ramp up production, long-term to reach decarbonisation targets. Natural gas decarbonisation is an important next step, not only to reduce carbon dioxide emissions, but also to facilitate Hydrogen as a promising energy source.”

In particular, PGNiG’s Majewski underlines the case of Poland, a country still heavily dependent on coal.

“It becomes a bridge fuel in the process of transforming Poland into a low- and zero-emission economy,” he explains. “Natural gas will be a balancing source of energy while Poland will be phasing out coal and implementing renewable and nuclear energy sources. Further growth in demand for natural gas is expected. PGNiG is ready to deliver on meeting the growing demand and at the same time we got involved in projects relating to hydrogen and biomethane as fuels that will be gradually replacing natural gas in the grid.”

The question for us people is this: are we ready to make a sacrifice today for a better tomorrow? If the answer is no, then we have to accept that oil and gas companies still exist and provide us with a comfortable life. And we have to have faith that they will innovate and that today’s investments will have a return in creating a sustainable future.

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