Comment: The oil & gas industry is not dying, it is transforming
To find their place in a low-carbon future, oil and gas companies must continue innovating to reduce their emissions
The oil and gas industry faces a particularly challenging set of obstacles—a volatile oil price, a wide talent gap, and an unrelenting image issue are key among these obstacles. On the latter subject, Saudi Aramco CEO put it well during his speech at London Petroleum Week, noting the industry’s “crisis of perception”. Many stakeholders, he said, see the sector as one with no future.
Oil and gas is not going anywhere anytime soon. Hydrocarbons power our homes, our vehicles, and our lives. No feasible alternatives exist for vital petroleum products including petrochemicals and lubricants. The industry is not dying, but it is changing, and it must continue to do so.
While progress has been made, oil and gas companies must do more. As Saudi Arabia’s energy minister, Khalid Al-Falih, said at the G20 Ministerial Meeting in Japan, the world needs more investment into research and development on reducing the impact of energy use. That includes creating cleaner energy sources and improving the performance of hydrocarbons to reduce their environmental impact.
With increasing pressure to limit carbon emissions, oil and gas companies are investing into technologies to counter their own carbon footprints. We have increasingly seen developments in carbon capture technology, taking emitted carbon to be sequestered or used in a company’s operations. Countries like Iraq are investing into infrastructure that will allow it reduce the amount of gas it flares, providing financial and environmental benefits.
Perhaps most important, however, is transparency. Oil major Shell released a statement earlier this year outlining its ties to lobbies and any misalignment in their positions on climate change. The company indicated that it would exit a US refining lobby because it disagreed with the group’s policies on climate change—Shell supports the 2015 Paris Agreement, which limits rise in temperature to far below two degrees Celsius. The company also announced that it will link executive pay to its emission targets as of 2020.
Still, a report by British Petroleum found that carbon emissions grew by 2% in 2018, with energy demand up 2.9%. BP says that is the largest yearly growth in emissions since 2010 to 2011. “The longer carbon emissions continue to rise the harder and more costly will be the necessary eventual adjustment to net-zero carbon emissions,” BP Group Chief Executive Bob Dudley wrote.
Oil and gas companies must find their place at the forefront of that shift; and shareholders are demanding as much. As the GCC’s national oil companies open up further to foreign investment (and some to public listings), this will play an increasing role in the regional oil and gas industry.
Carbon emission reduction should place high on the list of oil and gas companies’ priorities, to ensure that this industry is well-positioned in what will surely be a very different future for hydrocarbon-based businesses.