OTC 2022: What’s Needed for the Energy Transition?

HOUSTON—Collaboration, policy support and technology are required for the energy transition, according to a group of panelists representing some of the world’s biggest energy and service companies.

Industry players—service companies, majors, small operators and international companies—have collaborated amongst themselves but the new energy mix will bring new partners together, Manish Misra, vice president of strategy and integration for Chevron New Energies, said May 2 at the Offshore Technology Conference.

“They have a different perspective; they have a different way of working and that’s where we will have to open our approach and be ready to collaborate with folks who are not our natural partners in our businesses,” Misra said.

Traditional energy and service companies have been transforming their operations, seeking to reduce emissions, better manage carbon and/or move deeper into renewables and low-carbon energy sources, on the road to net-zero by 2050.

“If we all have the same ambition, we can get there.”—Stein Rasmussen, Group Strategy Director, SBM Offshore

Chevron has allocated $10 billion through 2028 for low-carbon initiatives. Its approach focuses on lowering carbon intensity, having already identified nearly 100 greenhouse-gas (GHG) abatement projects to pursue. Its strategy also includes growing its lower carbon business by focusing on renewable fuels, hydrogen, carbon capture, utilization and sequestration (CCUS) and offsets.

A ‘Clear Path’

The energy transition also requires policy support, panelists agreed.

“I think it’s very important for governments to supply not only policies that encourage renewables but reliability,” free of worry about who is in office and what type of lease sales will be available, said Lauren Spence, senior business development manager of offshore wind for TotalEnergies.

Like its peers, TotalEnergies has also integrated climate change into its strategy as it pursues CCUS activities, generates electricity from renewables and gas and further expands its renewable energy portfolio, including in the U.S. where it recently acquired Austin-based Core Solar.

“We also need a clear path from the permitting and regulatory standpoint where we don’t feel like our opportunity will be able to stop or stalled,” she said.

However, policy support alone won’t get the industry there, said Anish Simon, vice president of emerging technologies and innovation for Equinor. Support such as subsidization and favorable taxation policy bring benefits for businesses. However, “what does that lead to? Probably inflation, probably social unrest.”

Invest in Tech

The key to the energy transition is technology, Simon said.

“You’ll have to invest in technology and you have to believe in the ingenuity of scientists and researchers,” he said. “When I look at it, there’s technology in one arm and there’s policy in another arm.”

Both will create social behaviors that shape the energy transition, possibly further reshaping the energy businesses.

“There’s technology in one arm and there’s policy in another arm.”—Anish Simon, Vice President of Emerging Technologies and Innovation, Equinor

Equinor’s net-zero ambitions include reducing its net carbon intensity by 20% by 2030 and 40% by 2035 as it increases capex allocation for renewables and low-carbon solutions to more than 50% by 2030. In addition to bringing down GHG emissions and reducing the carbon intensity of its business, it intends to establish up to five hydrogen clusters by 2035.

Getting to net zero by 2050 is important and companies must have plans to get there, added Stein Rasmussen, group strategy director for SBM Offshore.

“To really get to net zero by 2050, you have to have a plan to get to that 45% by 2030 and that’s starting to become more urgent,” he said. “This forces us to take action and to work with our clients as a service company. If we all have the same ambition, we can get there.”

SBM’s strategy is built on three pillars: optimize, including reducing cost and emissions during a project’s life cycle; transform, lowering carbon footprints, breakevens and cycle times; and innovate, launching products such as an FPSO with near-zero carbon emissions.

A price on carbon?

Is a price on carbon required for the energy transition?

How else would a change in behavior be incentivized, Simon said, pointing out it could bring cost parity to, for example, sustainable aviation fuel. “It also gives some predictability on what your investment would look like,” he said.

As the carbon tax debate continues, companies are pushing forward with new technologies and improving existing ones. Still, there are hurdles to overcome, panelists said.

For existing technologies, this includes modification and improvement to the technology qualification process, Poul Skjærbæk, head of service innovation for Siemens Gamesa Renewable Energy, said before turning to floating wind new product development.

“We have to, of course, go through the technology readiness levels and then we have to pilot test,” he said.

“If you have one issue with a unit, you have 50 issues in the field,” Skjærbæk said, signaling scale could pose risks. He stressed the importance of pilot tests in developing the next generation of technology before scaling up. The end product, as mentioned by other panelists, is not yet known, he said, noting the industry is going through a learning phase during this energy transition.

More than hydrogen, wind

For Simon, the energy transition is not just about hydrogen, wind or the next generation of low- or carbon-free energy. He said his team explores any and everything when it comes to emerging technology innovation; however, thoughts don’t stop at energy. Change comes with potential societal impacts that the energy industry should heed.

Take rising ethanol production’s impact on food supplies. Or, “You cut off your gas value chain. What’s your impact on fertilizers?” he asked. The story is the same with water.

“We have to, of course, go through the technology readiness levels and then we have to pilot test.”—Poul Skjaerbaek, Head of Service Innovation, Siemens Gamesa Renewable Energy A/S 

Massive amounts of water are needed for green hydrogen, something that could become problematic in water-scarce areas—perhaps, calling for more investment and research in desalination, as noted by an OTC attendee who brought up the topic during Q&A.

“If you look at these clean technologies, all this comes into play,” Simon said. “That’s why an energy transition that I look at or when my company looks at it, it’s not just wind, hydrogen. [It’s] the whole society. The way we interact is going to change, and that’s why we started asking the question, ‘What would energy business look like?’”

That’s a question other energy companies may be asking, too, as the energy transition drive reshapes business models and operations.

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