Page 7 - NorthAmOil Week 20 2021

NorthAmOil COMMENTARY NorthAmOil

Under the NZE
scenario, many of
the planned new
liquefaction plants
would also not be
needed.

LNG liquefaction facilities currently under con- envisaged over the next 10 years, as well as an
struction or at the planning stage.” elimination of flaring. Companies should also
The decline in gas trade is shared fairly evenly electrify their operations where possible.
between LNG and piped supplies, which will “Some oil and gas companies may choose to
contract by 60% and 65% respectively. Demand become ‘energy companies’ focused on low‐
will fall by 5% per year on average during the emissions technologies and fuels, including
2030s, which may mean some fields are closed renewable electricity, electricity distribution,
prematurely or shut in temporarily, the IEA EV charging and batteries,” the IEA said.
notes. By 2050, half of the remaining gas con- Ultimately, the IEA report offers only a
sumed will be used to produce hydrogen. roadmap. It is very unlikely that any notable
oil and gas producing states will follow its rec-
Risks and rewards ommendation about ending upstream invest-
Were the IEA’s predictions to come true, it would ment now. France, Ireland, Denmark and now
entail millions of job losses across the fossil fuel Spain have banned the issue of new exploration
industry in the years to come, and many billions licences, but only Denmark and Ireland produce
of dollars of lost investment. Shrinking demand meaningful amounts of hydrocarbons, and are
over the coming years would mean weak prices, continuing to develop new production projects.
squeezing out all but the lowest-cost producers Nevertheless, the report may influence deci- Many
such as Saudi Arabia. No surprise, then, that the sion-making by countries looking to impose
IEA envisages OPEC accounting for at least half tighter restrictions on upstream development governments
of the world’s oil production in 2050. ahead of the UN Climate Change Conference will conclude
The energy transition presents significant in Glasgow in November.
risks to the hydrocarbon industry, the report There are also considerable difficulties in that continued
concludes, but there are also certain opportu- forecasting the outlook for some clean energy
nities. Coal-mining operators can shift towards solutions. Neither CCUS nor green hydrogen investment in
the extraction of minerals needed for clean have yet proved to be feasible at an acceptable
energy technologies, for instance. The oil and cost. Yet the report forecasts a growth in annual some oil and
gas industry is meanwhile well-positioned to CO2 capture to 7.6 Gt by 2050, and a rise in gas production
develop carbon capture utilisation and storage hydrogen consumption from 90mn tonnes in
(CCUS), low-carbon hydrogen, biofuels and 2020 to 530mn tonnes by 2050. The report also is necessary to
offshore wind. calls for a quadrupling of wind and solar capac-
“Scaling up these technologies and bringing ity additions by 2030, but the issue of finding an ensure future
down their costs will rely on large-scale engi- adequate means of storing such large amounts
neering and project management capabilities, of intermittent renewable energy is yet to be energy security.
qualities that are a good match to those of large resolved.
oil and gas companies,” the IEA explains. Faced with these uncertainties, many govern-
Minimising emissions from oil and gas oper- ments will conclude that continued investment
ations should be a “first-order priority” for the in some oil and gas production is necessary to
industry, with a 75% drop in methane emissions ensure future energy security.™

Week 20 20•May•2021 www. NEWSBASE .com P7