While the natural assumption would be that oil and gas leaders would be opposing the energy transition, the reality is different. Although the global energy transition is a threat to the demand, social and financial future of the sector, they have a vital part to play in continuing international energy supply.
The challenge
The challenge for the oil and gas sector is the decarbonisation targets of most nations. The push to transition to more sustainable energy sources is a consequence of concerns over climate change and the resultant impact on our environment.
Therefore, for industry leaders, there is a need to engage with policymakers and investors, seeking to prove that they can exist in a carbon-free or low carbon world. It will be difficult for sector leaders, as much policy-making is seeking to disincentivise fossil fuels. Equally, investors are becoming a driver of decarbonisation action, as they become more attuned to the need for risk-assessing the environmental impact of energy creation.
The solution
First, the transition to other energy sources will be gradual. This time will afford the oil and gas sector some time to rethink business models that will better suit a decarbonised world. As a hedge, the companies could look to invest in the development of renewables and new technologies. However, it could be more than this. It could be that companies invest in infrastructure that supports electrification in the upstream operations. These efforts could be part of an ongoing process of decarbonising and offsetting any carbon created.
Oil and gas companies also have expertise in a complex supply chain and the development of markets. This expertise could be deployed to support a transition to a low carbon energy approach. If the sector actively engages with this energy transition, they could help to shape a better reputation with shareholders, the general public and government policy-makers and regulators.
The role that oil and gas can play
If oil and gas companies choose to engage with the market and the supply chain offering low carbon solutions, there are strategies they could employ that would make this successful. First, they could look to their exploration, extraction, manufacturing and distribution process and look to offset the carbon emissions created. This strategy will work best if there is a concerted effort to communicate this approach to the broader world.
Second, supporting better metrics and metrology upstream could drive efficiencies and show better returns for the use of oil and gas in an energy strategy. It might mean that oil and gas companies take responsibility by investing in concepts of net-zero emissions and the circular economy, adhering at all times to the Paris Agreement.
As oil and gas companies are international organisations, they are also in an excellent position to encourage cross-border projects for carbon emissions reduction. They can use Article 6 of the Paris Agreement to facilitate this. The consequence of such positive efforts to rewrite the reputation of the sector will also have the added benefit of encouraging younger talent into the industry who will have new visions for how oil and gas can sit in a future energy strategy.
Exiflow is committed to improving energy efficiency and maximising the potential of the oil and gas sector. If we can help in your efforts to transition to the future of energy, contact us today.