Accelerate Energy Transition While Recognizing Role Of Oil And Gas, Industry Bosses Say

The 23^rd World Petroleum Congress (WPC) – widely regarded as the oil and gas industry's most prestigious and high profile global event – returned to Houston, Texas, US on December 5, 2021 in a materially different setting compared to past outings. Described as the "Olympics" of the oil and gas business, the WPC has been held since London hosted the first round in 1933. When it was last in Houston in 1987 for the 12^th WPC, the town took pride in calling itself the oil and gas capital of the world.

But these days Houston seems to have gotten itself a new title, that of "The energy transition capital of world", with billboards to this effect greeting visitors to the burgeoning economic hub stateside. But visitors aren't the only ones mulling over the approaching energy horizon. During the COVID-19 pandemic, which pushed the staging of the WPC itself back by 12 months, oil demand and prices temporarily hit the floor.

However, with the current market sentiment seesawing between promising vaccination drives and emergence of new COVID variants, Omicron being the latest, fossil fuel demand has rebounded sharply as trading for 2021 approaches its conclusion. Natural gas prices in Europe and Asia are already near pre-pandemic levels and oil is lurking around price levels last seen in 2019. This post-COVID demand bounce alongside underinvestment during the pandemic has resulted in power, fuel and heating supply shortages in many markets.

Despite that, global oil majors continue to limit hydrocarbon exploration and production. The idea is to shift to renewable energy development to cut carbon emissions, all under policymakers' and societal pressure faced with the debate on climate change. However, a stark warning was delivered by industry bosses at the five-day long WPC – if the ongoing transition is not orderly, and the role of fossil fuels in the wider energy mix is not recognized, chaos will ensue with consumers bearing the brunt of it.

Speaking at the congress, Saudi state-owned oil and gas company Aramco's CEO Amin Nasser noted: "Energy security, economic development and affordability are clearly not receiving enough attention. When we talk of an energy transition, it needs to be orderly. What we are witnessing is far from it."

Darren Woods, CEO of ExxonMobil XOM , told the WPC his company was working to reduce greenhouse gas emissions by 40-50% by 2030 against 2016 levels. "But even under the most credible scenarios, including net zero pathways, oil and gas will continue to play a significant role in society's needs."

Several of Woods and Nasser's peers warned about about undue pressure on hydrocarbon extractors, and the very real danger resource scarcity could pose versus rising demand. In that context, perhaps the quote of the WPC came from Jeff Miller, CEO of Halliburton.

If the worst case scarcity scenario were to unfold, Miller noted: "I think that for the first time, in a long time, we will see a buyer looking for a barrel of oil, as opposed to a barrel of oil looking for a buyer!"

He went on to comment that current spending on oil and gas projects was 50% below historical levels, which in the Halliburton chief's opinion was hardly the way to support a transition. Resource scarcity isn't the only cause for concern, a potential talent pipeline shortage is another major anxiety the industry faces.

Given the current rhetoric on the imminent end of the fossil fuel industry, many STEM or science, technology, engineering, and mathematics students are being put off from joining the industry primarily in Western markets. A survey of 5,600 respondents under the age of 35 in 110 countries and 6 continents conducted by the WPC's Youth Congress offers a case in point. The findings point to a generally favorable opinion of the energy industry as a career pathway in Africa, Middle East and Asia. However, the pessimism about joining the industry is the highest in Europe and North America.

In these anxious times, many are calling for the industry's focus to shift to emerging technologies and process efficiencies, and their transformative impact on lowering emissions and furthering the role of hydrocarbons in a future low carbon energy mix. By looks of things, if the WPC exhibition floor was anything to go by, many are taking notice.

Kit offering everything from robotic solutions to artificial intelligence, virtual reality health and safety equipment to advanced analytics, seemed to be on display in Houston. Even Miller's Halliburton was offering industry solutions designed to "lower emissions and increase performance" via "all-electric" fracturing or fracking, the very technique that underpins the US shale oil and gas bonanza.  

But the current crude dichotomy – of criticizing oil and gas extraction yet complaining about energy price shocks and volatility in the face of supply shortages – is one that needs to be shaken off. Practically all of the leading 25 international oil companies by barrel reserves (or market capitalization) have committed to a phased lowering of emissions by 2030, and net zero by 2050.  

However, transitions by their very nature take time, and an honest conversation needs to be had, according to Sonya Savage, Minister of Energy of Canada's hydrocarbon heartland of Alberta. Savage's hometown of Calgary - Canada's own energy capital - next takes over the mantle of hosting the 24^th WPC after Houston in 2023, and the Canadians believe the energy narrative at both home and abroad needs a dose of realism.

The minister told the WPC: "We never underestimate the need to lower emissions, especially methane emissions, and are committed to reducing them by 45% by 2025. The Canadian oil sands are the only production basin in the world aspiring to go net zero by 2050, with the participation of all regional operating majors from Suncor to Chevron CVX .

"Reflecting Alberta's resource diversity is our investment in hydrogen where we see immense potential. We are the largest producer of hydrogen in Canada and have bigger ambitions. Yet, we are not moving off oil and gas as there are no reliable and stable alternatives to keep the lights on and homes warm."

Not to mention a complete absence of anything viable for the petrochemicals and aviation mix, even as we remain a long way off from moving human mobility to go all electric. Hence, much of the industry is calling for energy pragmatism. Whether such calls will be heeded or not remains to be seen. On it would depend the evolution and future of the global energy industry.