March-April , 2021 | @ green

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By 2025 , renewables would be the dominant source of electricity supply at 40 per cent , followed by coal and gas

By Khirtini K Kumaran

Wei-nee was previously Chief Strategic Officer of the Sustainable Energy Development Authority ( SEDA ) of Malaysia . After 15 years in the renewable energy sector serving the Ministry of Energy in Putrajaya , she joined the oil and gas to pursue her passion in the energy transition in that sector .

Running out of Time

At the start of her presentation , Dr Weinee expressed the energy transition ’ s urgency to share the global carbon budget . According to a report from the IPCC ( 2018 ), the global carbon budget for a 50 per cent probability of 1.5 ^o C temperature increase is less than 500 Gt of CO2 , and there is a window of 11.5 years remaining .

If this is brought forward to 2021 , that window translates to less than 10 years . The Covid-19 pandemic caused a drop the GHG emissions by a record low of seven per cent in 2020 alone . This translated to an average temperature increase of 2.1 ^o C by the end of this century .

While emissions due to Land Use , Land Use Change and Forestry ( LULUCF ) remained more or less constant for the past century , the rapid increase of emissions is mainly due to the burning of fossil fuel ( Exhibit 1 ).

In 2019 , coal contributed nearly

Exhibit 1 : Sources of Global Emissions

40 per cent of the global emissions , whereas oil & gas contributed about 55 per cent .

Resilience of Renewables during Pandemic

While Covid-19 has caused the oil price to collapse and most sectors to a near economic standstill , renewables were among the few industries that have witnessed tremendous growth .

Specifically , there was a strong demand for wind and solar , thanks to the green economic recoveries that most countries had in place coupled with increasing stakeholders ’ pressure for corporates to embrace ESG investments .

The rapid decline in the cost of solar and wind energy also accelerated their growth . In October 2020 , the IEA declared that solar was the cheapest form of energy . It is breaking one record after another , boosted by improving competitiveness .

The IEA also acknowledged that renewables were set to grow aggressively . By 2025 , renewables would be the dominant electricity supply source at 40 per cent , followed by coal and gas .

The Covid-19 pandemic has shed light on what a climate crisis could look like . Not surprising , today , the drive to accelerate energy transition comes from our race to achieve nett zero carbon emissions .

Nett Zero : Will we get there ?

As of 2020 , we had nearly 130 countries declaring their commitment to nett zero carbon emissions by 2050 , including leading corporates . Despite the pledges , will we get there ?

The bad news is that the IEA ( 2020 ) showed that the existing and emerging technologies today would not be sufficient to reach global nett zero goals . There is a need for more innovations to close our residual gap to get the nett zero goal .

Stakeholders need to be on board and be committed to operationalise the nett zero goal . This includes the government , the industry , financial institutions , and civil society .

What does this mean to the oil & gas sector ?

The good news is that oil majors have demonstrated their environmental stewardship by announcing their nett zero targets for their Scope 1 and 2 .

Some notable oil majors such as Shell , BP , Equinor , Repsol , and Occidental Petroleum have expanded their nett zero commitment to Scope 3 .

In Malaysia , we are very proud that Petronas has led by example by being the first oil company in Asia to set a nett zero target .

“ Hibiscus Petroleum Bhd , with operating assets in Malaysia and UK , recently declared to become a nett zero emissions producer and adopt energy transition as one of our core business drivers ,” said Wei-nee .

Energy Transition for Oil & Gas Sector : According to a study by Rystad Energy , the E & P sector focuses on three pillars of energy transition ( Exhibit 2 ).

These pillars are energy diversification , portfolio resilience and decarbonisation . E & Ps typically invest in renewables ( e . g . solar , offshore wind ), low carbon technologies ( EVs , batteries ), and digitalisation / automation in energy diversification .

Investments that include renewable

Energy transition in the oil and gas sector is very challenging . It reminds me of what energy transition was like 15 years ago in the electricity sector . The only difference is that now we have run out of time ”.

– Dr Wei-nee Chen

energy production could help reduce their Scope 3 emissions and reduce their carbon intensity of aggregate energy produced .

Some E & Ps focus to improve the resilience of their portfolio of assets by managing the financial risks of their investments with regards to exposure to fluctuating oil prices , possible drop in demand ( due to increasing electrification of mobility ) and imposition of the carbon tax in certain jurisdictions .

While the long-term oil demand is likely to decline , gas will increase in demand due to its role as bridging fuel in managing the intermittency of solar and wind in the electricity grid . Unlike oil which cannot be decarbonised , gas can be decarbonised .

The final pillar of energy transition applies to all E & P companies , which is decarbonisation . Decarbonisation is an essential aspect of the energy transition , and for the upstream , this will reduce emissions from combustion , flaring , and venting .

What ’ s in it for the OFS industry ?

While the Covid-19 pandemic has caused severe job cuts for the oil & gas sector , Wei-nee shared findings by Rystad Energy which revealed that oilfield service suppliers ( OFS ) could diversify some O & G capabilities and replace up to 40 per cent of 2019 ’ s revenue by servicing the renewable markets .

Specifically , contractors providing EPCI services will find it easier to apply their competencies towards the green shift . This includes expanding their services to supply the end-to-end development and operations of renewable power generation .

However , some services may be challenging to deploy in the context of energy transition operations , e . g . seismic , G & G , OCTG , drilling services and tools , as they are deemed as less relevant in the energy transition space .

Most traditional oilfield service suppliers are looking to expand into low carbon segments , meaning technologies or services aiming to reduce or prevent emissions from oil and gas E & P activities . This can be done by offering more efficient operations and digital solutions .

Another emerging market within the energy transition is clean energy infrastructure , where suppliers can provide services to support blue or green hydrogen infrastructure , CCS , or energy storage in general .

This is a market where engineering houses , fabricators , and equipment manufacturers will find growth opportunities and synergies . Wei-nee cited a few examples in which OFS have diversified , leveraging on their core skills .

For instance , Sapura Energy in 2019 announced an award for offshore wind turbine substructures in Taiwan as part of an offshore wind farm with a total capacity of 640MW .

In another example , she highlighted a global oilfield service provider , Schlumberger , which collaborated with LafargeHolcim to explore CCS development in two of LafargeHolcim ’ s cement plants in Europe and North America , using Schlumberger ’ s CCS technologies .

Challenges are plenty , but we only have one planet

Wei-nee concluded by sharing some challenges faced in the energy transition . These included balancing the energy trilemma for policymakers to achieve energy security , energy affordability and environmental sustainability .

In closing her remarks , Wei-nee said : “ We only have a window of fewer than 10 years for the global carbon budget , and we must remember we only have one planet for our children . They do not have plan ( et ) B ”. — @ green

Exhibit 2 : Energy Transition in the E & P Sector Source : Rystad Energy , Feb 2021