What are the implications of the energy transition for the oil and gas industry?

There are several diverse products other than fuel that are resultant of Oil and Gas which are an integral part of the consumer economy. These products will take a frontal position for the Oil and Gas industry. Also the power fuels of oil and gas will still stay relevant for the industry as a major source of energy.

It might even fall lower than imagined before 2030 if new (yet unexplored) sources of renewable energy come on board and are welcomed globally sooner

The oil and gas industry will need to pivot to less of a baseload supplier role and more of a supplier of last resort role as existing fossil plants become reliability providers during the transition to relatively new technologies like wind and solar combined with bleeding edge electricity storage technologies. This will require the industry to rethink both its cost and revenue structure. Pricing will need to change from a low variable cost, utilization-driven profit structure to more of an insurance premium model with reservation charges (insurance premiums) that can cover the fixed cost of maintaining readiness and higher variable cost (deductibles) to attract and pay for resources during periods of need.

There is a famous quote: "The stone age did not end because there was no stone left"! Similarly energy transition is very natural to make a better choice among the energy baskets available. It means more capex, opex and jobs; though a different one.

As the world shifts towards renewable energy sources, there will likely be reduced demand for traditional fossil fuels like oil and gas, affecting the industry's share of the energy matrix and profitability. Companies in the oil and gas sector might face difficulties in attracting capital due to concerns about the long-term viability of their assets in a carbon-constrained future. To adapt, oil and gas companies might diversify their portfolios by investing in renewable energy technologies, such as solar, wind, to remain competitive in the evolving energy landscape. Governments worldwide are implementing stricter regulations aimed at reducing carbon emissions, which could lead to increased compliance costs for oil and gas companies.

In my opinion, several key aspects contribute to the rise in regulation: Emission Reduction Targets, Renewable Energy Mandates, Energy Efficiency Standards and Carbon Pricing Mechanisms. The increase in regulation aims to create a supportive framework for the energy transition, aligning economic activities with environmental sustainability. While these regulations present challenges for some industries, they also create opportunities for innovation, job creation, and the development of a more resilient and sustainable global economy. Businesses that proactively adapt to and embrace these regulatory changes are likely to thrive in the evolving landscape of the energy transition.

Increasing government regulations, incentives and subsidies (European Commission’s European Green Deal, United Nations’ Paris Agreement, IRA Act) are pushing oil, gas, and energy companies to look for more circular and sustainable solutions to meet carbon-neutral targets.  Another drivers are changing customer, investor, and employee expectations. Conscious consumers continue to put pressure on companies to focus on sustainable practices and renewable energy sources. There is also mounting pressure from investors for companies to become more sustainable.

The emission regulations with time and the carbon credit or tax market might influence the demand and alter the alternative the amount of investment that might flow into this sector.

Europe's leverage for a green transition differs from fossil-fuel dependent developing nations. Imposing regulations risks crippling their economies, already struggling to meet local energy demands. While the World Bank's efforts seem well-intentioned, a "one-size-fits-all" approach won't work. Notably, many developing countries have already pledged to end routine gas flaring by 2030, showing their own commitment to progress.

It was the IPCC in 2018 that stated we must stay below 1.5 DegC. Paris was behind the Science in 2016. In fact we might be finding that 1.2 DegC proves is too much Global Warming for a large part of our Planet’s Habitats and Land-use. Global Sea Level rises lag severely behind Temperature rises. Up until 2018, Climate Science was very poor - the data was too sparse that Scientists could not agree. In 2018, only 90% of Climate Scientists agreed that 1.5 DegC was the actual limit. Today, we have past the point where simply stopping Emissions would mean our living Planet would go back to its previous state. The Energy Transition requires Emissions to be Net Zero and Habitats remain intact. Both have to happen.

Digitalization and advanced technology is changing the way companies work, creating more opportunities for partner collaboration and opening doors to new options for innovative business models. A barrel of oil is not the central focus of many oil and gas companies. Some large oil and gas companies are set to make a switch to “energy” to focus on customer needs and diversifying to include new revenue streams, such as renewable energy, electrical charging stations, advanced chemicals, biofuels, hydrogen, LNG.

The energy transition compels the oil and gas industry to undergo significant innovation and adaptation to new technologies. This imperative comes from the shift toward cleaner and more sustainable energy sources, changing consumer preferences, and the evolving regulatory landscape. Several key aspects highlight the industry's need for transformation: Renewable Energy Integration, Digitalization and Advanced Technologies, Decarbonization Technologies, Hydrogen and Alternative Fuels and Energy Storage Solutions. Without a doubt, the energy transition presents a compelling need for innovation and adaptation. Embracing new technologies is not only essential for environmental sustainability but also crucial for the long-term viability.

The main area in production domain would be most likely primary production or at best the WF type recoveries. As any enhanced recovery method will be uneconomical in a low price environment.

The most of the innovation, once the energy transition would effectively start, without being in infancy forever, would be within the concept of distributed power sources. This could be achieved with local grids or local energy communities.

Currently, Energy is provided by 80% Molecules and 20% Electrons. That needs to flip completely, with the Energy Transition is not secured until more Electrons are delivered than Molecules. That puts massive stress on Grid Infrastructure - requiring Transformation. Low Carbon Renewable Energy sources will put a massive burden on need for mass Metals & Minerals, with insufficient resource available. So Innovation yes; Competition no - Scale-Up yes. As yet, the Green Economy is very uncertain. Could take many years to solve.

Energy transition is complex process where major unertainties are higher oil prices, political alignments, and reliable arternatives. Opportunity for crude oil sustaining over next five decades is there but it comes with conditions such as enough supply to the demand, stable crude price horizon, the oil prices not crossing 'pinching point price' of other alternatives. Sustaining oil industry through this transition is really important for obvious reasons such as known energy source, acceptance across the globe, available technology to use it, being user friendly, and easy porting.

Without the Green Economy being achievable, Oil & Gas demand requires CCUS to reduce emissions through the Energy Transition. Typically this would add around $15/bo.

The oil and gas industry works to reduce emissions and help the world reach the Paris Agreement objectives. In the energy transition, oil and gas industry will continue to be an important part of the broad mix needed to deliver affordable, reliable and modern energy products and services. The oil and gas industry contributes in many ways: - reducing carbon emissions by: improving energy efficiency in operations and products (flaring and venting) - carbon neutrality strategies: investing in renewable energies (wind, solar, biofuels, hydrogen) and services around energy efficiency - implementing low-carbon strategies that include carbon-neutral products and services, CCUS-CCS (Carbon Capture Utilization Storage)

Transition is a complex process. The use of new energy sources will continue to be tested for their total green potential and ease of use. This will bring most of the innovations in short and mid term future. This might bring opportunities for Oil and Gas, if the there is a quantum jump in efficiency of energy generation and use from Oil and Gas improves, or might completely obliterate the use of oil and gas in energy sector. The reality may be some where between these two extremes.

The opportunity is to study new frontiers The challenge is to be above any interest that is not that of mother Earth and of the public

The oil and gas industry will have to re-strategies the downstream for value added HC chain products. Including recycling options. The recycling will be a lucrative option with growing invironmental demands. The cost optimised technological innovations will have to be explored. The margins of the fuel products will be also the challenge in future.

Each oil and gas industry and each of the oil's service companies should be re-denominated as an "Energy Company" and operate in all achievable energy sector: I mean here not only Photovoltaic or Wind electrical energy but also Hydrogen, Hydroelectrical, Geothermal, et cetera. The % balance of activities would be 100% oil first but then it would eventually shift to have oil & gas as a minor percentage of the activities.

Oil and gas companies have some major advantages in pursuing the energy transition and decarbonization solutions: Their experience in large-scale project management, existing capabilities in gas storage and transportation, and technical know-how are valuable assets. For example, as a reservoir engineer, skills that are vital for CCUS include: 1. understanding subsurface geology, fluid dynamics, and reservoir behavior. 2. evaluating and ensuring the suitability of reservoirs for carbon capture and sequestration. 3. analyzing reservoir capacities, integrity, and long-term storage potential. 4. knowledge in flow assurance which is critical to the design and efficiency of carbon capture and storage systems.

1. Different, New and more complex reporting and administration system to follow align with GRI as an example. 2. New perspective and different approach in operation and investment aspect from upstream to downstream. 3. New jobs opportunities and supply chains related to meet the transition phase demands.