Operators and service companies need to provide the world with traditional energy sources while also planning for a clean energy future. 

hartenergy.com  (Source: P.V.R.Murty/Shutterstock.com

The oil and gas (O&G) industry is not one to wallow in its own adversity. It may not be necessarily fast to act, but at least its hope is eternal. When the industry found itself in both the pricing and demand basement in late spring and early summer, the near-immediate discussion on Zoom calls was “What will the industry look like on the other side of this?”

The shellshock had barely settled in when, for better or worse, we all were trying to see better-case scenarios. And while the industry certainly isn’t “on the other side” of anything—demand destruction and COVID-19, to name the main ones—it does appear we have at least made it through the dark tunnel. Oil prices have stabilized in the $50/bbl range, even having a cup of coffee in the $60/bbl range in late February. Rig counts continue to climb ever so slightly. There’s even a chance a few companies might make some money this year.

But the reality that does seem to be settling in is that oil and gas—and in particular, shale—will likely never return to its heydays of the past. Most analysts agree that oil demand is unlikely to rebound to pre-COVID-19 levels. A recent report by McKinsey & Co. suggests oil demand will peak in just eight more years, and gas in 2037.

Aspectus recently reported that, “Over the long term, the impacts of behavioral shifts due to COVID-19 are minor compared to the ‘known’ long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend toward electric vehicles, whose impact is estimated to be three to nine times higher than the pandemic’s by 2050.”

Despite a world that seems to be (very) slowly weaning itself off of fossil fuels, the O&G industry is not going anywhere anytime soon. The same report noted that by 2050 more than half of all global energy demand will continue to be met by hydrocarbons. One of the keys to long-term sustainability for the O&G industry is how it responds to the energy transition.

The net-zero goals set by many supermajors and service providers admittedly seem lofty, and it’s unlikely the step changes toward those goals will be noticeable on a macro level. Instead, they will be incremental—a new technology adopted here, a reduction in flaring emissions there. If enough companies take enough such actions, it will add up.

The transition to carbon reduction goals for the O&G industry is an instance of the whole being greater than the sum of its parts. And the foundation of the movement is being established: carbon capture, produced water recycling and flaring mitigation are the low-hanging fruits of ESG compliance.

If the O&G industry is going to not only serve global demand, but thrive such that it finds new avenues for growth, it will need to walk a fine line. It will need to operate under its traditional role of providing the world oil and gas for reliable energy while also being good stewards of the environment, appeasing investors and seeking new avenues for energy creation.

Diversification, anyone?


Views: 92

Reply to This

© 2021   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service