14 NEW ENERGY
@ green | November-December , 2020
Green Energy , Blue Skies and Black Gold : Are we at breakpoint ?
Has the global energy mix reached a point of inflexion to accelerate the energy transition towards environmental , social and economic sustainability ?
Zainul Rahim
BY RITA JONG
Who would have thought that the Covid-19 pandemic in 2020 would almost cripple the global economy , bringing the total consumer spending and travel to practically an impasse ? Many industries , including the oil and gas sector , suffered significant setbacks with billions of people under stay-at-home regulations and travel restrictions .
With these movement control and travel restrictions , the aviation industry and the land transport sector were severely affected . As worldwide transportation accounts for 60 per cent of global petroleum consumption , the pandemic resulted in a demand downturn for fossil fuels and a drop in the price of oil .
Many believed the pandemic would kill the oil and gas industry . And what with the rise of green energy and the growing concern about climate change , fossil fuel does not look like it stands a chance .
Oil and gas veteran , Zainul Rahim Mohd Zain , however , had a different view . The Chairman of Hibiscus Petroleum Berhad , an independent oil and gas exploration and production company , who has been in the fossil fuel industry for more than four decades , shared his views on the emerging trends and the interacting dynamics in the Energy Mix Evolution Cycle .
Factors shaping the energy industry
Five trends are shaping the oil and gas sector :
• The Covid-19 pandemic ,
• Climate change challenges ,
• Geopolitics ,
• Advances in innovative technologies , and
• A shift in value systems . “ Most of the trends have been on the horizon for quite some time now . The exception is the Covid-19 pandemic which is the only driver that has recently emerged ,” said Zainul .
Zainul spoke at a webinar titled “ Green Energy , Blue Skies and Black Gold – are we at BreakPoint ?” organised by the Malaysian Oil and Gas Engineering Council ( MOGEC ) recently .
“ The year 2020 will go down in history as the year Covid-19 almost paralysed the global economy as governments struggled to flatten the pandemic curve through lockdowns which severely affected domestic movement and international travel . It has impacted the oil and gas industry tremendously .
“ The industry was subjected to further downturn shock in March when OPEC + members were unable to reach consensus on production quotas , resulting in unconstrained production . Also , with the US shale oil production in full swing , the oil price just collapsed ,” he said .
( OPEC + is a loosely affiliated entity consisting of members of the Organisation of the Petroleum Exporting Countries , or OPEC , and 10 of the world ’ s major non-OPEC oil-exporting nations )
Zainul said the energy demand would pick up again from the second half of 2021 , but it would be from a lower base .
“ The annual global energy demand is expected to fluctuate some six to eight per cent lower than the pre-pandemic forecast for the next 20 to 30 years ”. However , the pandemic was not an outright loss . Zainul cited Prof Klaus Schwab , the Founder & Executive Chairman of the World Economic Forum , who said : “ The pandemic represents a rare but narrow opportunity to reflect , reimagine and reset our world .”
The pandemic has caused a reset – in the way we do things , in our expectations of companies , in our expectations of governments and of our priorities .
“ There is a silver lining to the pandemic . Less land and air traffic , fewer factories operating , and fewer activities in general effectively means less pollution and the return of clear blue skies and cleaner environment .
“ This goes to show how quickly we can adapt to the crisis , and also it is not too late to save the world as mother nature is so resilient ,” he added .
There is also an urgency to find solutions to address the global warming problem .
Zainul said : “ A recent report by DNV-GL ( an independent expert in risk management in quality assurance ), released in September 2020 , concluded that the energy transition is not happening fast enough to bring the world to within reach of the goals established by the Paris Agreement .
“ The report indicated that , based on published carbon emissions forecast , the carbon budget for a 1.5 ° C global warming target would be exhausted in 2028 , 22 years earlier than 2050 , the goal established by the Paris Agreement .”
( Carbon Budget refers to the cumulative amount of CO2 emissions permitted over some time , to keep within a certain ( global warming ) temperature threshold .)
The report also indicated that for a 2.0 ° C temperature increase , the carbon budget would be used up in 2051 .
He said what was even more alarming was that a warming of 2.3 ° C would be reached by the end of the century ( 2100 ), a level considered dangerous by the scientific community .
Hence , he added , the message was clear that we were running out of time , and there was an urgent need to push for decarbonisation to deliver the climate change agenda .
“ Energy prices are influenced by factors beyond market forces of supply and demand . Geopolitics also impact energy space . For example , the ongoing trade wars among significant economies like the US and China could have unintended consequences .
“ In 2018 , the Trump administration imposed anti-dumping tariffs on imported solar cells and PV ( Photovoltaics ) modules , an action directed mainly at China .
“ This tariff which was meant to help boost the American PV manufacturing industry , however , made solar modules artificially more expensive in the US ,” he said .
Zainul also said the Covid-19 pandemic had accelerated the adoption of digitalisation in business operations . The advances in innovative technologies through digital transformation also gained momentum in the oil and gas