Energy Transition Insights – Unpicking ONS 2022: the questions for oil and gas

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1974 saw the launch of Offshore Northern Seas, an obscure collection of companies extracting oil and gas from the North Sea. Today, this biannual event, renamed ONS, attracts 65,000 visitors from more than 100 countries. It is no longer just about oil and gas, but covers areas as diverse as offshore wind, batteries, hydrogen and carbon capture and storage (CCS). But it remains a key date for oil and gas companies, not least because the trends showcased at the event are vital to the future of the industry.

The theme of this year’s event was “trust”, a rare commodity after Russia’s invasion of Ukraine in February. The Ukraine crisis has eclipsed the debate at the ONS, with many discussing how oil and gas can help solve the energy trilemma of security, sustainability and affordability. There is clearly a role for oil and gas, with even Tesla boss Elon Musk saying “we need more” right now. The question is how much and from where.

Norway, which, as in previous years, hosted the ONS, was an appropriate place for this debate. High on the agenda was whether the wealthy nation should export more resources to its European neighbours, whether in the form of electricity, when its own citizens need it, or low-energy fossil fuels. cost, as it claims to be a leader in the transition to net zero.

More broadly, liquefied natural gas (LNG) was seen as vital to overcoming the short-term energy crisis, but the consensus was also that regions like Europe were moving away from these fossil fuels even faster than before the events. in Ukraine. This highlights the fact that current opportunities in areas such as LNG may be short-lived and that oil and gas players may be asked to use today’s high fossil fuel revenues to fund energy projects. tomorrow’s energy transition, especially as global progress towards net zero emissions is badly off target. The oil and gas industry is well aware of this openness. This year, the ONS boasted more decarbonization technologies than ever before, and the event’s Norwegian hosts strove to demonstrate just how much the country can contribute to net zero efforts.

The direction of travel was highlighted in a Westwood Global Energy Group presentation by Stuart Leitch, Principal Analyst. All North West European countries bordering the North Sea have set net zero emissions targets, which equates to a massive replacement of fossil fuels with renewables. The UK, for example, plans to have 50 GW of offshore wind by 2030, while reducing upstream oil and gas emissions by 50%. Norway, meanwhile, is targeting a 40% reduction in upstream emissions and 30 GW of offshore wind by 2040.

Growth of low carbon industry
Offshore wind developers and ONS supply chain players showed strong performance, all eager to take advantage of pending licensing opportunities from Norway. The announcement of the world’s first cross-border carbon storage agreement, involving a Yara fertilizer plant in the Netherlands and the Northern Lights CCS project which is expected to come online in Norway by 2024, bolstered the company’s credentials. Norway on energy transition at the event.

Elsewhere, the energy transition is leading to the emergence of large hydrogen and CCS clusters, such as the East Coast cluster in the UK and Northern Lights in Norway. Alongside these big mid-term bets, where project developers are just beginning to make final investment decisions, ONS showcased a slew of technologies, from batteries to solar, that can be scaled today. . Perhaps one of the most obvious opportunities here and now is to leverage technology and data, which can help improve efficiency and reduce emissions across all energy sectors.

What the oil and gas industry can and will do with it remains unclear. European players clearly agree with the need to support the energy transition even if there are differences in approach on the issue. Italy’s Eni, for example, chose to create clearly defined business units, such as Plénitude for renewables and Natural Resources for upstream oil and gas, and list them separately. Others, like Shell and Equinor, are keen to maintain the value of the integrated model.

The question remains if and when to make a full transition. Ørsted in Denmark has opted for a global approach, with 90% of its global energy production now coming from renewable energies. But it is clear from the sessions at the ONS that this journey has not been easy and may not be feasible for companies that are not primarily public. Similarly, while there is recognition of the value of integrated operations, there is also a growing awareness that renewable energy and oil and gas are very different types of businesses in terms of operating, financing, performance, etc.

Outside of Europe, the debate over whether and how to adopt renewables is much less advanced, with many companies still wondering how to simply reduce Scope 1 and 2 emissions. Here, the CSC looks set to play a role, although once again questions remain over its importance, with some saying it may be the only opportunity left for some oil and gas players in a decarbonized world.

A need for informed decisions
Against this backdrop, the sessions at the ONS highlighted the need for a coherent strategy that enables financiers to engage with the oil and gas industry and addresses not only net zero targets, but also a broader need. environmental, social and corporate governance performance. Investment remains the Achilles’ heel in the energy transition narratives of most oil and gas players, with spending on low-carbon technologies and projects falling far short of spending on traditional business activities.

This lag could perhaps be forgiven given the number of imponderables the oil and gas industry faces in the energy transition. But time is running out, especially for players in countries like the UK and Norway where there are clear and significant opportunities in emerging industries such as CCS and low-carbon hydrogen.

Oil and gas companies that want to get in on this action need to position themselves quickly within these industries, and to do that, they need to start making informed decisions as soon as possible. With this in mind, Westwood recently launched Atlas New Energies, an integrated market intelligence solution covering energy clusters, offshore wind, hydrogen, CCS and related oil and gas infrastructure in the UK and Norway.

Harnessing Westwood’s unrivaled depth of data and heritage in the North West Europe region, the tool allows users to access a database of over 250 new energy projects in the UK and in Norway and interview them, providing greater transparency and understanding of business opportunities. To learn more, request a demo now.

The summary: the main titles of the month
• The Netherlands sets an offshore wind target of 70 GW by 2050 alongside a North Sea energy cooperation agreement between nine European states that could see 260 GW installed by mid-century.
• Abu Dhabi’s national oil company sends the country’s first-ever low-carbon ammonia shipment from its Ruwais Fertiglobe complex to non-ferrous metals supplier Aurubis in Germany.
• Aker Solutions joins the growing movement towards transparency in emissions reductions by committing to a net zero 2050 plan using the methodologies of the Science Based Target initiative.
• Australian mining giant Fortescue Metals Group is committing US$6.2 billion to achieve net zero emissions in Scopes 1 and 2 by 2030.
• The European Commission approves expenditure of 5.2 billion euros for the important project of common European interest Hy2Use hydrogen.
• Nova Scotia in Canada is targeting 5 GW of offshore wind leases by 2030, to support green hydrogen production.
• The US Department of Energy launches an Earthshot program to drastically reduce the cost of geothermal production.
• Biden administration’s landmark Inflation Reduction Act wins Senate approval.
Source: West Wood Global Energy

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