An SPE Live International webinar was presented on 23 August 2021.
In the webinar, two international spokesmen answered questions posed by SPE International (Society of Petroleum Engineers). Below I have merged and slightly edited most of the comments.
The moderator was Jasmin Shaikh of SPE. The speakers were Hisham Zubari, Senior Advisor, National Oil and Gas Authority, Bahrain, and Mike Gunningham, Chief Production Technologist, SGS Subsurface Consultancy, based in Holland.
Note: Bahrain adjoins Saudi Arabia and is very close to Qatar and UAE (United Arab Emirates).
Q. What is the meaning of net-zero in the energy transition?
The concept is important since 75% of all greenhouse gas (GHG) emissions originate from fossil fuels. But the timeline of net-zero 2050 may be too soon, as replacing oil and gas operations too quickly would cause serious problems.
The transition needs to be done responsibly: no-one should suffer – neither companies nor the economy. The industry wants not to be part of the problem but to be part of the solution, and even more – to lead to the solution.
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Examples were given of Middle East efforts in the energy transition:
· UAE at 1.3c/kWh has the lowest cost of electricity in the world (in the US cost is 13c/kWh).
· UAE and Saudi Arabia are driving energy efficiency to higher levels using sophisticated business models.
· Liquid hydrogen from Saudi Arabia and UAE is being exported to Japan.
· Egypt has plans to invest in hydrogen and battery storage of electricity, and with Saudi Arabia has plans for a grid-scale 1 GW (giga-watt) battery that is bigger than the best ones in current operation (300 MW or mega-watt).
· Egypt and Saudi Arabia have commissioned wind farms of 400 MW and 1.7 GW.
· Saudi Arabia are planning to plant 50 billion new trees in the region.
· Carbon capture and geothermal energy are under research.
The view from Holland, where Gunningham lives, is that climate change is happening, as outlined in the extensive IPCC report just out. Half of the country of Holland is below sea level, which makes people more conscious of sea levels rising because of climate change. One half of new cars being built in Holland are electric vehicles (EVs). There are wind farms and solar projects all round the country.
The oil and gas industry will become part of the solution, and through new technology they will step up and make a name for themselves in the climate arena. The industry needs to develop a strategy, by collaborating, and that will lead to net-zero.
Q. The energy landscape – what will it be like in 2050?
Rich countries in Europe and North America have more money to lead the way and develop solutions. For example, solutions in carbon capture and storage (CCS) include the Northern Lights project of the Nordic countries, and Teeside, a project by bp in the UK. This is an opportunity to use the industries’ assets: lots of empty oil fields and gas fields that can store GHG.
The Middle East perspective is more pessimistic about net-zero by 2050. Beyond 2050, the world will definitely need oil and gas and the world will be more resilient to climate change by then. Oil and gas will always be cheaper for developing countries, some of which are in energy poverty.
There will be electric vehicles (EVs) all over the place, but the world will still need asphaltene to pave the roads they drive on.
A mechanism is needed for rich countries to assist poor countries during the transition. For example, a business model is needed to transition an energy infrastructure to achieve net-zero, which may entail a cost of $140 trillion. Who will provide the money and how will it be spent? Fossil fuels companies would have to shift from a “short-term” profits goal to a “long-term” profits goal if they decide to embrace renewables.
Despite this, CCS will become a very profitable business.
Oil and gas companies first need to transition themselves — they cannot wait until this future is defined by others. Companies have knowledge, skills, infrastructure and capital to make the transition, so they can lead a broader energy transition. Although this will likely be a painful process for poor countries of the world, the energy companies can make the world a happier place to live.
Q. What are the keys to success of the energy transition?
In the Middle East, fossil energy is so cheap that there is no incentive to begin a transition to renewable energies.
The International Energy Agency (IEA) says fossil energy needs to be reduced by 4% every year to get GHG emissions under control. But if energy is owned and run by a national government, as it often is in this region, it will take a lot of time and effort because private companies can’t go it alone.
It’s estimated that investment payback time for a company undertaking a transition to renewables will be 7-10 years. This is too long for most companies that operate for profit.
A balance needs to be sought between investment recovery and climate action. We don’t have a model for this. We see fragmented efforts but no unified approach. We also see a lot of challenges. For example, air-conditioning is critical for this part of the world, but it won’t be easy to transition this to renewables.
In Europe, a concept exists for a collaboration between energy suppliers, GHG emitters, and government policy to allow all the parties to work together. Governments can add funding for pilot studies that show it will work, and bring down the costs.
The result will be customized solutions for each country or each region of the world. But it won’t be just oil and gas companies, it will include GHG emitters such as steel-making or cement companies. The collaboration is also likely to include high-tech companies who want to keep their servers running despite climate change.
Q. How do you see the role of SPE during the transition?
First is knowledge sharing, working together, and spreading information about new developments around the world.
Second, SPE can bring stakeholders of the transition together.
Third, SPE can communicate specialized topics of the transition with people on the street who don’t understand completely.
Remember, energy is bigger than just the oil and gas industry. And SPE will have to try to include a wide variety of renewable energies, as well as GHG emitters, if its serious about helping the transition.