Petroleum Review February 2021

Also in this issue: Commercial opportunities from new energy collaborations

Oilfield services sector at a strategic crossroads

Innovation is key for second generation offshore energy

The magazine for oil and gas professionals in the energy transition February 2021

Green recovery Energy sector recovery gathers pace – what to watch for in 2021 Magazine of the

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VOLUME 75 | NUMBER 884

Contents

Editor Kim Jackson MEI +44 (0)20 7467 7118 kjackson@energyinst.org

Also in this issue: Commercial opportunities from new energy collaborations

Oilfield services sector at a strategic crossroads

Innovation is key for second generation offshore energy

The magazine for oil and gas professionals in the energy transition

IN THIS ISSUE…

Governments’ ‘green recovery’ plans will support renewables growth but prices for oil and gas are expected to remain subdued in 2021

7 Industry

This month’s issue of Petroleum Review begins with an look at the energy sector’s expected pace of recovery from COVID-19 and highlights key trends for 2021.

Professor John Loughhead, former UK BEIS Chief Scientific Advisor, explains what he would like to see from the COP26 meeting to be held in Glasgow later this year.

Our energy transition features start by shining a spotlight on the oilfield services sector, which is approaching a point in its lifecycle that will require it to choose between alternative strategic pathways. We also highlight the commerical opportunities for the oil and gas industry through collaboration with the UK’s offshore wind sector. Meanwhile, a fundamental shift from fossil fuel-derived energy sources to clean alternatives for transport fuels is underway in Europe; while UK companies are spearheading a technological revolution to optimise offshore wind operations and wind power.

Speaking ahead of this month’s IP Week 2021, Nick Walker, President and CEO of Lundin Energy, explains how the past year has been an opportunity to prove resilience in the face of a variety of challenges.

10 Energy Institute

Kim Jackson, Editor

February 2021

Deputy Editor Brian Davis +44 (0)20 7467 7142 bdavis@energyinst.org Digital & Video Content Officer Elliot Tawney +44 (0)20 7467 7117 etawney@energyinst.org Editorial enquiries +44 (0)20 7467 7118 editorial@energyinst.org

Green recovery Energy sector recovery gathers pace – what to watch for in 2021

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2

Perspective

3

Upstream

Abbreviations The following are used: mn = million (106) t/d = tonnes/day bn = billion (109) kW = kilowatts (103) tn = trillion (1012) MW = megawatts (106) cf = cubic feet GW = gigawatts (109) cm = cubic metres kWh = kilowatt hour b/d = barrels/day km = kilometre boe = barrels of oil sq km = square equivalent kilometres t/y = tonnes/year Abbreviations go together eg 100mn cf/y = 100 million cubic feet per year.

5 Downstream

Printed by Geerings Print Ltd Magazine of the

Features

Prospects in 2021 12 The green recovery

Peter Kiernan

Technology 24 New frontiers for renewables

Brian Davis

Climate change 14 COP26 – the way ahead

Professor John Loughhead

IP Week Q&A 28 Tackling a year of challenge

Nick Walker

Energy transition 16 Oilfield services – time to choose

Alan Barr, Craig Stevens and

61 New Cavendish Street, London W1G 7AR, UK

Chief Executive: Louise Kingham OBE FEI

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Energy Institute Registered Charity No.1097899, 61 New Cavendish Street, London W1G 7AR, UK. © Energy Institute 2020. The Energy Institute as a body is not responsible either for the statements made or opinions expressed in these pages. Unless specifically stated, the magazine is not a partner with, agent of, or in any other way affiliated with any of the advertisers in the publication; nor does it endorse any of the products of such advertisers or external inserts included with the magazine.

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Adrian Del Maestro

19 Offshore wind – commercial collaboration

David Linden and Michelle Gomez

See also online...

Don’t forget to read our sister publication, Energy World, also available in flipbook format, which this month includes a look at UK hydrogen projects and outlines the case for a national energy agency to help the UK government deliver net zero.

Visit www.bit.ly/EW_Feb21

22 Alternative fuels – a fundamental shift

Florent Andrillon

Energy in Conversation Season 2 – Listen now!

Energy in Conversation, the Energy Institute podcast, returns this month for a second season. Featuring young energy professionals from across the world as part of the EI’s Generation 2050 initiative, episode 1 asks what it means to have a ‘Career with a Conscience’ in today’s energy landscape. Listen now at https://energy-inst.org/podcast

Perspective

PERSPECTIVE

2050? Talk 2030 and you’ve got my attention A Steve Holliday FREng FEI, EI President

year ago I wrote in these pages about the importance of the COP26 climate talks due to have taken place in Glasgow in November. One unimaginable year later and here I am again in the same position. But it isn’t Groundhog Day, because the last 12 months have seen the prospects for tackling the threat of climate change, in my view, transformed.

As an engineer I have never doubted the potential of human ingenuity. Talented professionals across our industry have the capability to bring into play the right mix of solutions. We are seeing this already, with astonishing advances allied with game-changing cost reductions. For its part, the EI has swung its work squarely behind the deployment of renewables; hydrogen; carbon capture, use and storage (CCUS); and – equally importantly – demand side efficiency.

But where I fear for our future is in the inertia of our political systems and corporate cultures. Vested interests and a ‘prisoner’s dilemma’* like no other have stood in the way of the ambition required.

Net zero breakthrough During the hiatus imposed on us by the pandemic, however, the case for targeting global net zero emissions by the middle of the century has gained traction within governments around the world.

President Xi’s commitment for China to reach net zero by 2060, and President Biden’s promise for the US to rejoin the Paris Agreement and target net zero by 2050 are stand-out moments. Japan and South Korea are also now among 120 countries, representing some 70% of the world economy, pledged to net zero.

This bodes well for the UK’s chances of pulling the world behind an ambitious outcome at COP26 in Glasgow this November. If realised, it starts to put 2oC within striking distance.

These moves have been mirrored across our industry, including by a number of the oil and gas majors.

It is a great irony that the very fuels that have provided the

2 Petroleum Review | February 2021

foundation for so much human progress – and still provide more than half of our energy needs – are largely responsible for the existential challenge we face.

But this sector also has vital engineering capabilities, financial weight and proven ability to deliver at scale. I have called for a new kind of leadership brave enough to place value on achievement beyond the short-term bottom line, one that has the emotional intelligence to be responsive to the agendas shaping our world.

Over the past year, this has started to emerge, with major players reaching beyond carbon intensity and putting absolute net zero goals into their business plans. Repsol, BP, Shell, Total and – I’m pleased to say – the EI itself – are among those taking this step. The same has been seen across myriad other sectors of the global economy.

Decade of delivery The climate science driving this, the real-world impacts, the groundswell of public sentiment and demands from investors are all well documented. The critical debate is no longer about whether we need to act to tackle climate change – but how quickly.

Global energy related emissions flatlined in 2019 and the pandemic has dented them even further, but that cannot lead to complacency. Nor should talk of 2050 tempt us into putting off action until later.

The challenge remains enormous – to underpin the global economy with a radically transformed energy system – and the next decade will be the decider. Change needs to be demonstrable and rapid, to get ourselves onto a manageable, affordable, responsible path to global net zero.

The period between now and 2030 will be defining in other respects too. We must build a resilient recovery from the global pandemic, and we must also finish the job of universal access to energy envisaged by the UN Sustainable Development Goals.

Almost 800mn people still don’t enjoy the benefits of electricity and

2.8bn still use polluting cooking and heating fuels. Those same populations are among the most vulnerable to the impacts of climate change. A sustainable future for them will be a test of whether we are succeeding – and that test comes in 2030, not 2050.

Critical friend Energy professionals look to the EI for the knowledge, skills and good practice they need to pursue impactful careers in this vital, fastevolving field. And we are proud to be into our second century of partnership with the energy sector.

The role of a professional body is also to have the courage, when it matters and when the science dictates, to lead, and to recognise and champion the best.

This month we convene our annual IP Week conference. It has become the pre-eminent opportunity for thought leadership and building collaboration, and this year discussions will focus on moving from crisis to low carbon opportunity over the next decade.

We will welcome industry CEOs including Bernard Looney FEI of BP, Anders Opedal of Equinor, Patrick Pouyanné of Total and other influencers from around the world such as COP26 High Level Climate Action Champion Nigel Topping and UNFCCC Director of Mitigation James Grabert. And I hope many of our members and partners will take advantage of the opportunity this year to join the debate virtually for the first time.

Humanity has succeeded in tackling great environmental challenges in the past, and I believe we can do so again. Last year saw encouraging, mutually reinforcing progress in technology and by governments and companies. But the true test is pace, and it starts now. ● IP Week 2021 takes place virtually from 23–25 February. Reduced rates apply to EI members.

Visit www.ipweek.co.uk *The ‘prisoner’s dilemma’ is a situation in which two parties, separated and unable to communicate, must each choose between cooperating with the other or not. The highest reward for each party occurs when both choose to cooperate rather than acting in their own self-interests.

UpstreamUpdate

Global offshore sanctioning to rebound and rise The UK offers operators the best profit conditions to develop big offshore fields, according to new analysis from Rystad Energy

T

his year hopefully marks the beginning of a recovery after a disappointing 2020, when the COVID-19 pandemic caused sanctioning of global offshore projects to dip to $44bn from $99bn the year before.

Rystad Energy projects offshore sanctioning to rebound to at least $56bn in 2021 and keep rising to as high as $131bn in 2023.

Operators are now even more focused on costs and profit margins, and majors are expected to concentrate their individual activity to fewer countries than before. This means the world’s resource-rich countries will have to compete more than ever to attract investments.

Rystad Energy has analysed how each country’s fiscal regime affects the profitability and breakeven price of developing offshore mega-projects across the world. This has resulted in a top five list of countries for profitable large-scale field developments, seen from the operators’ perspective.

For the purpose of modelling each country’s score, Rystad has used a sample project with the characteristics of Norway’s Johan Castberg field, ‘a single-phase project with plenty of available data that makes it an ideal candidate for benchmarking’. To get a fair comparison the analysis does not take into account the

activity of national oil companies (NOCs) in their home countries.

In Rystad Energy’s analysis, the UK scored the highest post-tax valuation and is said to offer the best profitability conditions for operators, with a net present value (NPV) of $11.1/boe in the country at a flat oil price of $70/b. Next in line are Kuwait ($11/boe), Canada ($8.9/boe), the US ($8/boe) and Colombia ($8/boe). (See Figure 1.)

In Norway, a non-NOC company would only enjoy an NPV of $3.9/boe from the Johan Castberg project, notes the market analyst. That said, other parameters factor in for operators, as Norway is a country where the risk of exploration is lower as the country shoulders some of the cost for unsuccessful wells, it adds.

‘The world’s average government take has declined in recent years and we expect that it will further drop going forward as oil and gas producing countries strive to attract foreign investors in a very competitive environment. Fiscal regimes that have higher government take will struggle to compete,’ comments Espen Erlingsen, Head of Upstream Research at Rystad Energy.

For each of Rystad Energy’s analysis simulations, gross resources, production, prices, investments and operational costs were kept constant. The differences were in the fiscal

parameters of the different fiscal regimes. The calculation of the key metrics was carried out from the approval year, which is 2018. Since there are varied fiscal regimes within the countries in the benchmarking exercise, it selected the fiscal regime that it felt best represented the country.

For Johan Castberg, the breakeven price ranges from around $25/b to around $65/b under the different regimes. Some of the key mechanisms that drive up breakeven prices are high gross taxes (like royalty or export tax) or tough cost recovery methods (such as cost ceilings and deprecation spread over many years).

When it comes to breakeven prices of the project, the lowest ones are in the UK and Norway.

Both countries benefit from only having net taxes (tax on profit) and an easy cost recovery system.

Countries such as Indonesia, Malaysia, Egypt, Russia and Algeria all have a high gross tax or tough cost recovery methods, reports Rystad Energy.

Johan Castberg FPSO Photo: Equinor

Figure 1: Average government take* and implied breakeven price for Johan Castberg by fiscal regime – breakeven prices in $/b (*Government take is defined as the present value of free cash divided by the sum of the present value of free cash flow and government take) Source: Rystad Energy

Petroleum Review | February 2021 3

UpstreamUpdate

Middle Esat

Shah Deniz begins gas deliveries to Europe The first commercial gas deliveries of Azerbaijani gas to Europe from the Shah Deniz gas field in the Caspian Sea via the newlycompleted Southern Gas Corridor (SGC) pipeline system commenced in late December 2020. The start of gas deliveries through the final section of the SGC – the Trans Adriatic Pipeline (TAP) – marked the full integration of the entire SGC gas value chain, stretching 3,500 km from Azerbaijan to Europe.

Deliveries through the final stage of the system followed gas deliveries to regional markets from the Shah Deniz field via the first two sections of SGC – the South Caucasus Pipeline expansion (SCPx) and Trans-Anatolian Pipeline (TANAP) – that started mid-2018.

The Shah Deniz field is the starting point of SGC, which has been built to deliver Caspian energy resources directly to European markets for the first time. The field is expected to supply 16bn cm of gas to markets in the region and Europe via SGC. Shah Deniz project partners are BP (operator, 28.8%), TPAO (19%), AzSD (10%), SGC Upstream (6.7%),

Petronas (15.5%), Lukoil (10%) and NICO (10%). The largest gas discovery ever made by BP, the giant field had approximately 1tn cm of gas and 2bn barrels of condensate initially in place. To date the field has produced more than 130bn cm of gas and more than 31mn tonnes of condensate.

The first phase of the Shah Deniz field began production in 2006, delivering more than 10bn cm/y of gas to Azerbaijan, Georgia and Turkey. The second phase of development began production in 2018 and, at plateau, will add 16bn cm/y of gas production capacity to bring total production capacity from the field to 26bn cm/y of gas. With the completion of the SGC pipeline system, this additional Shah Deniz gas will flow to Georgia, Turkey, Greece, Bulgaria, Albania and Italy.

Sangachal terminal, part of the Shah Deniz 2 project

Photo: BP

IN BRIEF A total of 30 companies have received offers of ownership interests in 61 production licences on the Norwegian Shelf in Norway’s latest offshore licensing round. Of the 61 production licences, 34 are located in the North Sea, 24 are in the Norwegian Sea and three are in the Barents Sea. A total of 12 of the licences are additional acreage to existing production licences. Both small companies and major international players are being offered exploration acreage, including Aker BP, Shell, Chrysaor, ConocoPhillips, Equinor, Ineos, Inpex, Kufpec, Lundin, Mol, Neptune, PGNiG, Total, Vår Energi and Wintershall DEA.

DownstreamUpdate

Leading the way on emissions-free buses Some 78% of Denmark’s urban buses registered in 2019 were electric

D

enmark leads the way when it comes to putting zero emission urban buses on the streets in Europe, with 78% of new vehicles being electric, according to the latest data from green NGO Transport & Environment (T&E). In Luxembourg and the Netherlands, about two-thirds of new buses were zero emissions. T&E said other EU countries now have a chance to catch up by including emissions-free buses in the COVID recovery plans they must submit to the European Commission by the end of April 2021.

In Sweden, Norway and Finland, 26%, 24%, and 23% respectively of urban buses registered in 2019 were zero emission (electric or hydrogen), according to T&A analysis. Meanwhile, Italy, Poland, Germany, the UK, Spain and France, which buy 70% of the urban buses sold in Europe, lag behind. In 2019, less than 10% of their newly registered urban buses were electric or hydrogen, it says.

However, Germany took a significant step forward in 2020 and is reported to be financing 80% of the higher purchase cost of e-buses. And Poland has announced that in cities with populations of 100,000 or more, all public transport will be fully electric by 2030, allocating €290mn to support this objective.

Figure 1: Zero emission urban buses in Europe Note: new urban buses registered in 2019 >8 tonnes gross vehicle weight with zero emission % being the sum of electric and hydrogen buses divided by the total. Trolley buses are not included in the electric bus data but make up a small amount of annual new registrations (49 in 2019) Souce: Chatrou CME Solutions (2020); T&E

Austria and Ireland registered no zero emission urban buses in 2019, while in Switzerland and Greece less than 4% of new buses were emissions-free.

T&E has also published a report identifying five key steps to get e-buses on the road, starting with political leadership and financial support. For example, the Dutch government specified in 2016 that

all newly-procured buses must be zero emission from 2025, and from 2030 all buses in use must be zero emissions. Furthermore, as part of the public procurement process, it called for bus contracts to be awarded only to operators meeting or exceeding these targets.

Biofuels

Greenergy invests in advanced biofuels project Greenergy is to invest in an advanced biofuels project that will create low carbon fuels from waste tyre feedstock.

The project will utilise pyrolysis and hydrotreating technologies to convert waste tyres into renewable drop-in advanced biofuels that can be used in diesel and petrol and qualify as development fuels under the UK’s Renewable Transport Fuel Obligation (RTFO). The plant will also have the capability to produce sustainable aviation fuel (SAF).

Processing up to 300 t/d of shredded tyres in the first phase, the manufacturing process also creates recovered carbon black, a product that can be used in the circular economy to produce new tyres and other industrial rubber products.

The plant is expected to be located at Thames Enterprise Park, a Greenergy joint venture near London, subject to planning approval and with a view to commencing commercial production in 2025.

The UK’s RTFO legislation requires that transportation fuels must contain a growing percentage of development fuel (dRTFC).

These are defined as new types of advanced biofuels made from sustainable wastes and residues of non-biological origin. This content target was introduced at 0.1% of total fuel by volume in 2019, and continues to increase each year to 2.8% by 2032.

The disposal of used tyres in the UK and around the world creates

significant waste, and under a European Directive, used tyres have been banned from landfill, often resulting in their export to the developing world. In the UK alone, some 55mn waste tyres are produced each year.

Photo: Greenergy Petroleum Review | February 2021 5

DownstreamUpdate

New fuels

Avfuel and Neste create sustainable aviation fuel venture Avfuel and Neste have formed a strategic partnership to create an efficient, continuous supply of sustainable aviation fuel (SAF) in the US. The strategic partnership positions Avfuel as one of the first US companies able to supply its customers with SAF on a continuous basis. Monterey Jet Center (KMRY) – an Avfuelbranded fixed base operator (FBO) in Monterey, California – will be the first customer to receive a consistent supply of SAF, with the first delivery scheduled for 1Q2021.

Craig Sincock, President and CEO of Avfuel, says: ‘This strategic partnership is an exciting development for the industry’s sustainability initiative and a natural next step in response to aviation’s growing demand for SAF… Together, we are able to support aviation’s sustainability

goals and enhance supply availability at a commercial scale, filling an immense gap in the industry’s supply chain.’

Neste expects to have the capacity to produce some 1.5mn tonnes (515mn gallons) of SAF annually by 2023. The company’s SAF is made from sustainably sourced, renewable waste and residue materials, such as used cooking oil. ‘It is a drop-in fuel that offers an immediate way to directly reduce greenhouse gas emissions from aircraft, requiring no new investments, modifications or changes to the aircraft or fuel distribution procedures,’ states Neste.

Prior to use, the Neste MY SAF is blended with petroleum-based jet fuel and then the blended product is verified to meet ASTM D-1655 specification for jet fuel. In its neat form and over its lifecycle,

Neste claims its SAF can reduce greenhouse gas emissions by up to 80% compared to fossil jet fuel.

Once blended at a 35% ratio, Avfuel anticipates a 19-tonne reduction in carbon emissions per truck load.

Photo: Avfuel/Neste

IN BRIEF Essar and Progressive Energy are to set up a venture to produce low carbon hydrogen at Essar’s Stanlow refinery in Ellesmere Port, Cheshire, UK. The joint venture will manufacture hydrogen at the refinery for use by Essar Oil UK and across the HyNet North West decarbonisation cluster region in north-west England and northeast Wales. Aiming to be the UK’s first net zero refinery, the Stanlow project aims to capture over 2mn t/y of CO2, equivalent to taking nearly a million cars off the road.

For more details, visit www.bit.ly/ PRFeb2021Stanlow and www. bit.ly/PRFeb2021Netzero

Stanlow refinery at Ellesmere Port, which forms part of the Net Zero NW Cluster Plan Photo: Net Zero NW

Motor Fuel Group (MFG) has signed an agreement to purchase seven

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Automobile manufacturer Renault and Plug Power, a specialist in fuel cell systems and hydrogen related services, are to create a 50:50 joint venture based in France that will target over a 30% share of the fuel cell-powered light commercial vehicle (LCV) market in Europe. The companies plan to build an end-toend fuel cell value chain offering hydrogen vehicles, hydrogen fuelling stations, hydrogen fuel and associated services.

• Effecting change – the case for a UK national energy agency • Underinvestment in energy hinders sustainable development • What happens after North America’s shale and tar sands rush?

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Ferrovial Servicios and Waga Energy are to produce biomethane at the Can Mata landfill, one of Spain’s

largest landfill sites, near Barcelona.

The Can Mata project is reported to be the first landfill gas injection project in Europe to be financed by a long-term power purchase agreement (PPA). Visit www. bit.ly/ PRFeb2021Landfill

In this month’s Energy World:

ld es ho ewabl VID re ren CO Offsho to postthe keyry recove Februa

operational stations and nine newto-industry (NTI) sites from BP as part of a wider agreement including fuel supply for 100 sites. The company plans to install a number of high power electric vehicle (EV) chargers at each location and will improve the shop offering at the sites, introduce a ‘food to go’ option where appropriate and improve the valeting offer. MFG operates over 280 BP branded sites. The acquisition will bring the total number of stations operated by MFG to 918, maintaining its position as the UK’s largest independent forecourt operator.

s to iosnion wind farmsy itis trganesmng storageraattion flexibilit ycin Addi se gene ERnedrgu increa zine

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Energy World is the monthly sister publication to Petroleum Review, covering renewables, power generation and energy efficiency. As an EI member, you can access it online, for free, at www.bit.ly/EWmag_home For more information visit www.energyinst.org

IndustryUpdate

Biden makes first moves on climate change Within hours of his inauguration as US President, Joe Biden signed an executive order to rejoin the Paris Agreement, cancelled the Keystone XL pipeline and halted efforts to drill for oil and gas in the ANWR

A

cting on his pledge to make the fight against climate change a top priority of his administration, new US President Joe Biden issued 17 executive orders within hours of his inauguration. First and foremost, Biden is rejoining the Paris Agreement, and the US will once again become a formal party to the global climate negotiations in 30 days. Ahead of the COP26 conference in November in Glasgow, the new US administration will have to define plans on how to cut emissions by 2030.

The move was welcomed by climate change leaders and campaigners, who want to see an ambitious US commitment to cut emissions this decade and a strong diplomatic push to encourage other countries to do the same.

Keystone XL pipeline cancelled Biden also rescinded the permit for the controversial Keystone XL pipeline. Work on the 1,900 km pipeline – which was to carry 830,000 b/d of oil from Alberta, Canada, to the US state of Nebraska, from where it would be distributed via the existing pipeline network to refineries in the Gulf of Mexico – had been halted under previous US President Barack Obama in 2015. It was subsequently restarted in 2019 by President Donald Trump.

Environmentalists and Native American groups have been fighting the project for more than a decade.

Moratorium on Alaskan drilling The new US President also put in place a temporary moratorium on drilling for oil and gas in Alaska’s Arctic National Wildlife Refuge (ANWR) and reinstated an Obamaera policy to close most federal offshore waters in the US Arctic and Northern Bering Sea to oil and gas exploration.

US–China relations Meanwhile, with different countries and industries jockeying for relief from tariffs, and with Biden saying that trade talks will take a ‘backseat’ to a domestic

recovery, changes to tariffs and overall US policies in relation to China are expected proceed somewhat slowly. These tariffs serve as a key bargaining chip with China, and market watchers believe it is unlikely that Biden will simply give them up easily without concessions. Therefore, although it is expected that Biden will ultimately veer towards cancelling the tariffs, the impact is likely be delayed to as late as 2022.

A full cancellation of tariffs between the US and China would increase maritime oil demand by approximately 300,000 b/d, according to Rystad Energy.

‘Biden boost’ for oil products After a devastating 2020, Rystad Energy has projected demand for oil products in the US to grow by 1.08mn b/d in 2021 to 19.1mn b/d. This projection left politics aside, but if President Biden lives up to his promises now he is in post, the market analyst expects to see an upside to US products demand of about 350,000 b/d as a result of the planned short-term economic stimulus and his infrastructure plan that will lead to construction activity, as well as in the medium term more efficient ports, bridges and roads that will enhance economic activity and passenger vehicle use.

The final details of Biden’s stimulus plan will be subject to negotiations in Congress. However, assuming that Congress approves the short-term aid in February, Rystad Energy expects to see an upside to US oil products demand of approximately 285,000 b/d for 2021, rising to 330,000 b/d in 2022.

Some of the infrastructure spending is expected to be directed towards creating ‘green jobs’ or projects that seek to limit future carbon emissions. However, Biden’s team will need to tread carefully to avoid losing senator votes in states that rely heavily on fossil fuel production.

Biden has pledged to make the fight against climate change a top priority of his administration Photo: Shutterstock

from 2022 through 2026, from Obama’s standard of 4.7%/y to only 1.5%/y. However, the US auto industry has been hit hard by the pandemic, with sales falling by approximately 15% year-on-year to between 14.4–14.6mn vehicle sales in 2020. As a result, automakers may lack the R&D and marketing funds to achieve Obama-era standards as soon as 2022.

Furthermore, amid cheaper prices for gasoline, Americans appear to be gravitating towards light duty trucks, with such vehicles comprising 56% of vehicle sales in 2019, leading to a year-on-year decline in fuel economy. This may make compliance with aggressive fuel economy standards (which involves purchasing credits from electric vehicle manufacturers like Tesla) much more costly for manufacturers.

Therefore, Biden is expected to adopt the deal that California struck with several major automakers to increase fleet-wide efficiency to 51 mpg (versus 54.5 mpg under Obama and 40.4 mpg under Trump). Given that several major auto manufacturers have already agreed to (and theoretically likely have begun preparing for) these rules, this could be an easy way for Biden to strike a compromise early on, while still achieving significant efficiency gains, suggests Rystad Energy.

Fuel economy standards Biden’s election also brings an end to Trump’s plan to decelerate proposed fuel economy increases

Petroleum Review | February 2021 7

IndustryUpdate

Hydrogen

Ørsted takes FID on first renewable hydrogen project Ørsted has taken its final investment decision (FID) on the Danish demonstration project H2RES, which will use offshore wind energy to produce renewable hydrogen. The project is expected to produce its first hydrogen in late 2021 and will be Ørsted’s first renewable hydrogen project.

The H2RES project will investigate how to best combine an electrolyser with the fluctuating power supply from offshore wind, using Ørsted’s two 3.6 MW offshore wind turbines at Avedøre Holme.

H2RES will have a capacity of 2 MW. The facility will produce up to 1,000 kg/d of renewable hydrogen, which will be used to fuel road transport in Greater Copenhagen

and on Zealand, the largest and most populous island in Denmark.

Martin Neubert, Executive Vice President and CEO of Ørsted Offshore, says: ‘We see renewable hydrogen and other sustainable fuels as cornerstones in reaching net zero emissions by 2050, and H2RES will contribute with key learnings to turn Europe’s ambitious build-out targets for renewable hydrogen into a new industrial success story. With the right framework in place that incentivises the shift away from fossil fuels, renewable hydrogen can decarbonise transport and heavy industry, which is paramount to creating a world that runs entirely on green energy.’

Avedøre power station, where H2RES will be located Photo: Ørsted

Net zero

IEA calls for urgent action on methane emissions Methane emissions from the global oil and gas industry fell by an estimated 10% in 2020 as producers slashed output in response to the COVID-19 crisis, according to the International Energy Agency (IEA), which also warns that these emissions could rebound strongly without greater action by companies, policy makers and regulators.

Methane is a much more potent greenhouse gas (GHG) than CO2 and makes a major contribution to global warming. According to the IEA’s 2021 update of its Methane Tracker, oil and gas operations worldwide emitted more than 70mn tonnes of methane into the atmosphere last year. This is broadly equivalent to the total energy-related CO2 emissions from the entire European Union.

‘The immediate task now for the oil and gas industry is to make sure that there is no resurgence in

methane emissions, even as the world economy recovers, and that 2019 becomes their historical peak.

There is no good reason to allow these harmful leaks to continue, and there is every reason for responsible operators to ensure that they are addressed,’ says Dr Fatih Birol, Executive Director, IEA. ‘Alongside ambitious efforts to decarbonise our economies, early action on methane emissions will be critical for avoiding the worst effects of climate change. There has never been a greater sense of urgency about this issue than there is today,’ continues Dr Birol. ‘To help accelerate these efforts, the IEA is releasing a “how-to” guide that governments and regulators can use to bring down methane emissions from oil and gas operations.’

The new IEA report, Driving down methane leaks from the oil and gas

industry: A regulatory roadmap and toolkit, offers a step-by-step guide for anyone trying develop or to update regulation on methane. Its advice draws on analysis of how more than 50 countries, states or provinces – from the US to Nigeria, from Iraq to China and Russia – have tackled methane emissions from a regulatory perspective.

The case for action is not just environmental or reputational. There are increasing signs that consumers are starting to look carefully at the emissions profile of different sources of gas when making decisions on what to buy. ‘A gas producer without a credible story on methane abatement is also one that is taking commercial risks,’ says the IEA. For more details, visit www. bit.ly/ PRFeb2021IEA

UK Prime Minister Boris Johnson has appointed Alok Sharma as fulltime President of the UN COP26 climate conference in Glasgow this November, with Kwasi Kwarteng appointed as UK Secretary of State for Business, Energy and Industrial Strategy (BEIS). Anne-Marie Trevelyan is UK Minister of State for Business, Energy and Clean Growth.

first comprehensive roadmap for the energy sector to reach net zero emissions by 2050. The new special report, The World’s Roadmap to Net Zero by 2050, will set out in detail what is needed from governments, companies, investors and citizens to fully decarbonise the energy sector and put emissions on a path in line with a temperature rise of 1.5oC.

The International Energy Agency is planning to publish in May 2021 what it claims will be the world’s

Linde has unveiled plans to build, own and operate what it claims will be the world’s largest PEM (proton exchange

membrane) electrolyser plant at the Leuna chemical complex in Germany.

The new 24 MW electrolyser will produce green hydrogen to supply Linde’s industrial customers. Linde will also distribute liquefied green hydrogen to refuelling stations and other industrial customers in the region. The company reports that the total green hydrogen produced will be able to fuel approximately 600 fuel cell buses, driving 40mn km and saving up to 40,000 t/y of CO2 tailpipe emissions.

IN BRIEF

8 Petroleum Review | February 2021

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This week will bring together two conferences, focusing on health, safety, environment (HSE) and sustainability, to deliver essential learning and sharing of international good practice to organisations across the energy industry.

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12/01/2021 13:30:04

EI News

Institute to bid fond farewell to longstanding CEO

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fter more than two decades as Chief Executive of the Energy Institute and its precursor bodies, Louise Kingham OBE FEI has announced she will be leaving the organisation in April to take up a new position with BP. Informing staff of the news, Louise said: ‘This is an incredibly exciting time for the energy industry. I have enjoyed my time at the EI immensely and will miss the family that exists within the staff team, volunteer base and wider membership. It has been an absolute honour and privilege to be your CEO. Now, new challenges beckon for me and the time has come for someone else to take the helm.’

EI President Steve Holliday FREng FEI paid tribute to Kingham, saying: ‘It’s never easy replacing a CEO and particularly in this case. What Louise has achieved has been extraordinary – from uniting the organisation’s precursor bodies, diversifying and internationalising its membership, and taking a determined lead on defining issues such as the energy transition and women’s representation in the boardroom. She is

respected for this work across the industry and will be missed by all at the EI. That said, she will hand to her successor an EI in tremendously good shape as the foremost professional body for the world of energy.’

‘Myself and the Board of Trustees are delighted Louise has this new opportunity to further her career in the energy industry.

The search process for a new Chief Executive has commenced. He or she will work with the Board of Trustees and Senior Leadership Team to develop even further our work with and for our members, partners and customers. There are big global challenges to be met – not least net zero emissions and universal access to energy – and we are determined the EI will continue to play its full part.’

In her new role with BP, Louise will work within the senior leadership to help support society in the move to a low carbon energy system, part of the company’s transformation into an integrated energy company with its sights set on net zero.

Information about the CEO search is at www.energyinst.org/about/job-vacancies

GETI report focuses on workforce experience of pandemic The fifth annual Global Energy Talent Index (GETI), the world’s largest energy recruitment and employment trends report, has been published. Focusing this year on the workforce’s experiences during the global pandemic, it finds despite an unprecedented year, optimism and resilience remain.

Encapsulating the views of 16,000 energy professionals of 151 different

nationalities and spread across 166 countries, the report, published by Airswift and Energy Jobline with the backing of the Energy Institute, shows an industry facing a number of once-in-a-generation challenges – from the energy transition and the decarbonisation agenda to geopolitical tensions and, of course, the pandemic.

Janette Marx, Chief Executive Officer at

Airswift, says:'There is no denying that this has been a challenging year for the energy industry, and COVID-19related instability is certainly being felt by the workforce. Yet, professionals seem confident in their ability to rise to the challenges ahead'.

The full report is at www.getireport.com/reports/2021

Generation 2050 takeover EI podcast

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ollowing the successful first season of the EI’s Energy in Conversation podcast last year, which received a 5-star rating and a total so far of 10,000 streams, the energy deep-dive conversation series is back with a second season.

Billed as a Generation 2050 ‘takeover’ – part of the EI’s new initiative to amplify the voices of tomorrow’s leaders – young professionals from across the world of energy will be in conversation with EI Fellows about their experiences starting out, and reflections on the challenges they face.

The opening episode is available now.

It explores what it means to pursue a ‘career with a conscience’, with Louise Kingham OBE FEI in discussion with

10 Petroleum Review | February 2021

Mervin Azeta, Business Delivery Manager at Schlumberger, and David Davidson, an offshore engineer with Ørsted. They discuss their own motivations, the challenges faced by women working

in a sector still dominated by men, and whether a career in oil and gas can be reconciled with the world’s climate goals.

Subsequent episodes will dive into CCUS, future grids, financing the energy transition and much more, all with a focus on the perspectives of professionals early in their careers, as well as with the substantive and technical content listeners of the first season have come to expect.

Energy In Conversation is a great listen, so help spread the word and leave us a rating! It’s available on all major podcast streaming platforms, including Spotify, Apple Music and Castbox, as well as on YouTube and the EI website at www. energy-inst.org/podcast

EI News

From COVID to climate – tune in to the global agenda at IP Week 2021

Bernard Looney, CEO - BP, Gauri Singh, Deputy Director - General, International Renewable Energy Agency (IRENA) and Nigel Topping, High Level Climate Action Champion -UNFCCC COP26

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eaders and influencers from across the world of energy are gearing up for the EI’s IP Week 2021 conference, which take place virtually for the first time in its long history.

Focused firmly on the new ‘decade of delivery’ facing the industry, big name speakers will include chief executives from the major oil and gas operators, alongside others from elsewhere in energy, academia, NGOs and government. With COP26 only months way, the line up also includes High Level Champion for Climate Action Nigel Topping, the UK’s Net Zero Business

Champion Andrew Griffith MP, UNFCCC Director of Mitigation James Grabert and IRENA Deputy Director-General Gauri Singh.

IP Week’s innovative virtual experience will enable delegates to move seamlessly from speaker sessions to networking and exhibition spaces in a special Knowledge and Innovation Hub. Speaking ahead of the conference, Louise Kingham OBE FEI says: ‘IP Week 2021 will be a critical moment for the sector to discuss its role in three historic challenges over the coming decade:

building a resilient recovery from the devastating COVID-19 pandemic, striving to achieve the UN goal of universal access to energy, and charting an ambitious course – at COP26 and beyond – for tackling the threat we all face from the climate emergency.'

‘Virtual means even more impact and reaching all geographies around the world’, she continues. ‘IP Week will once again convene the top industry leaders and influencers to discuss, debate and share how they are working to deliver on these massive challenges. The urgency of action, together with the associated opportunities and challenges, will be at the heart of IP Week 2021.’

IP Week 2021 takes place virtually from 23–25 February. Reduced rates apply to EI members. Visit www.ipweek.co.uk EI President Steve Holliday FREng FEI write on page 2 of this issue about the importance of the next decade and the issues being discussed at IP Week 2021.

EI enables members facing hardship during pandemic Charitable donations from past and present members are helping to meet the membership fees of those who have been made redundant during the COVID-19 crisis.

‘With many thousands facing losing their jobs as a result of the global economic shutdown – in oil and gas in particular – the support of a professional body is even more important than ever,’ says Sue Beard FSAMP, Head of Professional Affairs at the EI. Assistance is being provided by the EI Benevolent Fund, which also funds EI Enable offering support through a confidential helpline open for members 24 hours a day.

‘Enable is there to help with information and advice on any kind of problem or issue, whether its childcare, finances, retirement or a legal issue. It can also provide a friendly advice if you need a bit of extra support.’

If you would like to apply for support with your membership fees, or further information about EI Enable, visit www.energyinst.org/membership-and-careers/ei-enable.

For free information and advice from qualified professionals or just a friendly voice, you can also call EI Enable anytime on +44 (0)300 303 4331.

New professional members The EI provides a range of professional membership grades and chartered titles. Achieving these higher levels of recognition supports your career development and demonstrates your commitment to the industry. Congratulations to the individuals who have achieved professional recognition and/or have acquired registration in the last few months.

Member (MEI) Mr A C W Powell MEI – Buro Happold Mr A M Turner MEI – RPS Mr J Featherstone MEI – Defence Infrastructure Organisation Mr D D Maguire MEI – Foster + Partners Mr N Das MEI – Reliance Industries Limited Mr B B Holt MEI – Ben Holt Consulting Mr A McGeachie MEI – Total E&P UK Mr M Kamuss MEI – MHNK Associates Dr H Moss MEI – British Petroleum Co Mr B Cott MEI – Cork Institute of Technology Mr O D Lee MEI – Ørsted Mr T Jenkins MEI – Chrysaor Fellow (FEI) Mr M Hassan FEI – CMS Cameron McKenna Nabarro Olswang LLP Mr T Rockell FEI – Energy Strat Asia Pte Ltd

Dr A Al Yousef FEI – Saudi Aramco – Upstream Research Center Mr S Dunhill FEI – Chevron Dr D G Karczub FEI – ConocoPhillips Mr T Appleton FEI – Burns & McDonnell Ms M Shehu FEI – Total Upstream Companies in Nigeria CEng Chartered Energy Engineer: Miss C De Bartolo – Ramboll Mr T A Liu – CLP Power Hong Kong Limited Mr B P M Richardson – Alpha Process Controls Dr B Gowreesunker – GreenYellow Indian Ocean CEng Chartered Petroleum Engineer: Mr U Muraleedharan Pillai – Borr Drilling Chartered Energy Manager: Mr B V Burke – Solar in Spain

Contact the EI Membership team on t: +44 (0)20 7467 7100 or membership@energyinst.org for details of upgrading your membership, applying for registration or for any other queries about your EI membership.

Petroleum Review | February 2021 11

Prospects in 2021

ENERGY

The green recovery Peter Kiernan, Lead Analyst – Energy, at the Economist Intelligence Unit, looks at the energy sector’s expected pace of recovery from COVID-19 and highlights key trends for 2021.

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he coronavirus pandemic upended energy markets in 2020, with lockdowns, crimped industrial activity and restrictions on travel causing global energy consumption to contract by an estimated 4%.

Demand for oil, gas and coal all fell during what was a challenging year, although consumption of renewables, especially solar and wind, increased. At the close of the year, energy consumption was expected to rebound partially, by 2.6%, as global GDP growth returns in 2021, but not strongly enough to return to 2019 levels. However, this scenario assumes that the global pandemic is contained; if this does not happen, energy consumption will weaken again.

As a result, 2020 and 2021 will be ‘lost’ years for the three fossil fuels. Of the three, gas will be impacted the least, with consumption forecast to return to 2019 levels by 2022 as the economic recovery drives demand from the industrial sector. Gas will also continue to be competitive with coal in the power sector, especially in the US and Europe.

Oil consumption is expected to show a strong rebound in 2021, rising by 3.1%, but coming off a sharper collapse in demand than gas. Changed behavioural patterns, such as more people working from home and lower levels of air travel, are likely to continue into 2021, preventing a bounce-back to preCOVID levels. It may not be until 2023 that oil demand returns to the level of 2019.

Meanwhile, following a severe contraction of nearly 6% in 2020, coal consumption will grow by a modest 1.8% in 2021, recovering only slightly from sharp falls in the US and Europe as power demand recovers. Demand for coal may now be in long-term decline unless renewed demand from Asia outstrips the structural declines in the US and Europe.

Policy drivers, priority on the grid and lower technology costs will make renewables a more attractive investment option going forward. Consumption of 12 Petroleum Review | February 2021

renewables (including solar, wind, hydro, geothermal and biomass) grew in 2020 and is expected to continue this trend in 2021, outpacing fossil fuels. Growth is forecast to be much stronger for both solar and wind in particular.

The Economist Intelligence Unit (EIU) forecasts a combined increase of 13%, which reflects the resilience of low carbon sources even as the COVID-19 pandemic depresses overall energy consumption.

Four key trends for 2021 The EIU sees four key trends developing over the course of the next 12 months.

Government policy will support growth in renewable energy – Climate-friendly approaches to economic growth will dominate in 2021, although not everywhere.

Of the four big greenhouse gas (GHG) emitters – China, the US, the EU and India – the EU will be the most focused on reducing climate change, using its stimulus spending to promote a green recovery. In 2021 it will set higher climate targets for 2030 and officially target a net zero GHG economy by 2050.

In the US, the Presidential win by the Democratic Party candidate Joe Biden will see US climate policy aligning with the EU, as he has pledged $2tn in climate-related spending over four years.

China has also set its sights on reaching peak emissions before 2030 and carbon neutrality by 2060.

South Korea, which has pledged carbon neutrality by 2050, is likely to advance its green agenda, as will Japan, which has pledged net zero emissions by the same year.

However, the outlook for the rest of Asia is less certain. ASEAN member states want renewables to account for 23% of energy demand by 2025, but this seems like an ambitious target. Indonesia, Malaysia, the Philippines and Thailand have renewables targets on paper, but growth in solar and wind deployment has been slow.

Prices for fossil fuels will remain subdued – Oil, gas and coal prices

will remain subdued this year, as consumption will only recover partially from the falls experienced in 2020. There is also a question mark over whether oil producers will stick to OPEC production cuts into 2021. Overall, we expect oil prices (Brent) to average $45/b in 2021, only marginally higher than the annual average for 2020 ($42.16/b).

US natural gas prices will average $2.74/b, reflecting a 43% increase from an all-time low of $1.92/b in 2020.

Low prices will weigh heavily on revenue streams of upstream producers of oil and gas, as well as coal companies, and hurt their market value. Traditional energy majors risk being upstaged by renewables companies. For example, in October 2020 it was reported that NextEra, a utility with significant solar and wind assets, had grown to rival ExxonMobil in terms of market capitalisation.

Photo: Shutterstock

Prospects in 2021

Restructuring and bankruptcies will affect US shale operators – The price slump will continue through 2021, placing pressure on oil and gas producers, especially those in the US shale patch. After some years of explosive growth, US oil production is expected to fall further in 2021, although not as severely as in 2020. The continuation of prices in the $40/b range means that many shale operators, especially those more exposed to debt, will struggle, and bankruptcies are likely to continue. A total of 36 shale operators went bankrupt in the first three quarters of 2020, compared with 42 in the whole of 2019. The rapid increase in shale output that was seen until 2019 is unlikely to be repeated.

Meanwhile, oil majors such as BP, Shell and ExxonMobil have announced job cuts in response to the price slump, with no real recovery in prices expected until after 2021. Some oil majors will continue to slash costs as they steer towards renewable energy, and others will look to divest non-core businesses.

Investment in the power sector will outstrip that in oil and gas – Energy investment declined in 2020 amid the economic downturn caused by COVID-19 and this will continue into 2021. According to the International Energy Agency (IEA), investment in the power

sector exceeded investment in upstream oil and gas supply in 2020 (although investment in both sectors fell), which suggests a shift in investment in the sector towards electricity supply. We expect this shift to become more prominent in 2021.

The decision by BP and Shell earlier in 2020 to target net zero emissions by 2050 shows that a growing number of upstream oil and gas producers think that there is a better business case for investment in low carbon sources of power. This is underlined by the fact that Trafigura, a large oil trader, has plans to set up a joint venture that would invest $2bn in renewables by 2025, focusing on solar, wind and energy storage.

Decarbonising oil and gas Last year saw a marked increase in the number of oil and gas companies announcing commitments to cut back on GHG emissions, reflecting a change in upstream oil and gas sector attitudes regarding the transition to a lower carbon energy system.

Nevertheless, there is a wide variation in both the level of details that have been announced, and what activities will be covered.

Some, such as BP, have included Scope 3 emissions as part of their net zero emissions target, while others have included only Scope 1 and 2 emissions, a much less ambitious task. Many operators have also only committed to reduce emissions by a certain amount by a certain year, and have not made a full ‘net zero’ pledge.

Nevertheless, it is clear that, firstly, the energy transition has, in just a short period of time, become considerably more important to an increasing number of oil and gas operators, and, secondly, the transition will be viewed by them as a topic which needs to be taken

into account when considering their longer-term plans.

The pathway to net zero emissions will be achieved in many different ways by operators.

In addition to adopting more efficient, less emissions-intensive operations, oil and gas outfits will increasingly invest in several low carbon options, such as renewables, energy storage, hydrogen and carbon capture technologies to reduce their carbon footprint. The renewables sector may not always offer the same high returns as oil and gas, but the attractiveness of investment in this sector is that it is generally seen to be stable, and thus avoids the volatility that plagues commodity markets. Furthermore, interest rates are expected to remain low.

Countries will also become more ambitious on the climate policy front in the run up to November’s COP26 meeting, and beyond, as evidenced by recent net zero emissions announcements

by China, the EU, Japan and South Korea. Therefore, developing a broad low carbon portfolio enables synergies with the direction of climate policy at a global level, if for no other reason than to avoid having carbon-intensive stranded assets.

The COVID-19 pandemic has also raised the possibility of a peak in oil demand sooner rather than later, which will likely enhance the focus on low carbon investments.

While it is clear that oil and gas use will be around for some time to come, 2020 may come to be seen as the pivotal year in which the sector put the energy transition more at the forefront of its longer term thinking for the future. ●

What to watch for in energy in 2021 China’s upcoming five-year plan – China announced in September 2020 that it would target peak emissions before 2030 and carbon neutrality by 2060. If it achieves this, it is likely to alter the trajectory of global emissions and help the world to control climate change.

The government’s next five-year plan for 2021–2025, which will be released in early 2021, will show how China plans to meet its new climate goals.

COP26 –The 26th session of the Conference of the Parties (COP26) to the UN Framework Convention on Climate Change (UNFCCC) was postponed by a year to November 2021 because of COVID-19. The meeting, to be held in Glasgow, UK, will force member states to review their progress against the targets set at the ground-breaking Paris Climate Conference in 2015. The conference will therefore be decisive in determining the path ahead for global action on climate change.

The future of Nord Stream 2 –The future of the Nord Stream 2 gas pipeline hangs in the balance in 2021. At the end of 2019 US sanctions halted construction of the pipeline, which will pipe gas directly from Russia to Germany (in addition to the existing Nord Stream 1). The US view is that the pipeline will increase Europe’s dependence on Russian energy supplies. Recent geopolitical tensions have increased pressure on the German government to abandon the project altogether. As Russia tries to complete the project by itself, the next US administration will have to decide whether it wants to prevent Nord Stream 2 from becoming a reality. ●

Petroleum Review | February 2021 13

Climate change

VIEWPOINT

COP26 – the way ahead

Professor John Loughhead FREng, former BEIS Chief Scientific Advisor, explains what he would like to see from the COP26 meeting to be held in Glasgow later this year.

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ll 197 countries who are party to the UN Framework Convention on Climate Change (UNFCCC), established at the Rio Earth Summit in 1992, meet annually to review activities and agree new actions to tackle climate change. This year, COP26 – the 26th Conference of the Parties to the UNFCCC – will be hosted by the UK and Italy in Glasgow on 1–12 November, a year later than expected due to the COVID-19 pandemic.

The discussions are especially important this year as they will examine progress against the targets agreed at the Paris meeting in 2015. There, for the first time, each and every country agreed specific actions called Nationally Determined Contributions (NDCs), to reduce emissions, develop adaptation actions, and to address so-called ‘loss and damage’ mechanisms to compensate for climate-induced catastrophes. The latter are still under discussion.

Importantly, all countries have been asked to revise their NDCs for COP26 to increase impacts by 2030, as current measures are predicted to result in average temperature rises of about 3.3oC even if they are all actually implemented.

Since 2015 work by the UNFCCC scientific group, the

14 Petroleum Review | February 2021

Intergovernmental Panel on Climate Change (IPCC), published in 2018, has shown that if average temperature rises can be held to 1.5oC the effects, in terms of extreme weather events such as heatwaves and heavy rainfall, can be significantly reduced compared to a temperature rise of 2oC. Adopting measures to try and achieve this target also has the benefit of slowing the rate of average temperature increase, which allows more time to implement adaptations to the inevitable changes in the environment that will occur.

But to do this, global emissions will need to reduce 45% from 2010 levels by 2030 and achieve net zero by 2050. Such changes are significantly greater than the targets adopted at Paris will produce, so the case for more urgent and ambitious action has become clear in the last five years.

In some ways the delay to COP26 taking place may prove advantageous to the discussions.

The world has changed markedly over the extra year. China, Japan, South Korea, South Africa and Canada have declared an ambition to achieve net zero emissions by 2050 or 2060, and the election of Joe Biden as President makes it very likely that the US will

dramatically change its position to a 2050 net zero target too. More than 110 countries have declared an intent to achieve this (although only six, including the UK, have specific legal commitments in place). The momentum has shifted, so for the remaining large emitters – notably India, Russia and Saudi Arabia – pressure will increase to demonstrate greater commitments than they have to date.

A real challenge for COP26 will be the extent to which this group is prepared to make a material contribution to the global emission reduction efforts. There are genuine issues they have to face, primarily the economic challenge, but the changed US stance could play a major influence on their position. It is reasonable to assume that the balance of views internationally has now moved to accepting that more ambitious action is required, as opposed to the position in Paris where there was debate about the need for the scale of response proposed by the climate leader countries.

Celebrating the signing of the Paris Agreement at COP21 in 2015 Photo: UNclimatechange

Targets for success The President of COP26, Alok Sharma, has indicated the meeting’s focus will be the transition to clean energy, clean transport, nature-based solutions,

Climate change

adaptation and resilience and finance. What will be critical are the binding commitments countries are prepared to make to deliver them. Aspirations provide cheery announcements, but the success of COP26 will be measured by hard targets and the support of means to deliver them.

Assuming we see targets accepted, I believe there will have to be an emphasis on innovation to enable them. The International Energy Agency’s (IEA) Energy Technologies Perspectives report last year claimed that 35% of required emissions reductions will come from technologies that are still at very early stages of exploration, and a further 40% from those not yet commercially deployed. This represents an enormous challenge that will require a response from both the public and private sectors.

Fortunately this has already started. For earlystage technologies the Mission Innovation initiative brings together 25 major countries working to accelerate innovation progress. Mission Innovation was launched at the Paris COP in 2015 with members pledging to double public resources for clean energy innovation by 2020. A few months ago they unanimously agreed to support a second phase, focused on delivering specific outputs needed to meet more ambitious emissions reduction targets.

In parallel, the Clean Energy Ministerial meetings have become a forum for countries to share information on transition policies, and form collaborations on demonstrations and developments in later stage, but non-commercial, technologies. Combined with the UNFCCC Race to Zero campaign, Oil & Gas Climate Initiative, Energy Transitions Commission, World Economic Forum Future of Energy and many others we have a plethora of campaigns. A valuable output from COP26 would be a means for these to work in a cohesive fashion rather than independently.

A substantial task Assuming COP26 does secure commitments globally, the task of delivering will be substantial.

The global economy is today underpinned by carbon-based energy and the implication of a change towards net zero emissions is its total transformation, something Rachel Kyte, Dean of the Fletcher School at Tufts University, has termed ‘a handbrake turn for the world economy’.

Energy and industrial infrastructure are typically longlived, so making the required changes at the pace demanded will not be easy, could demand early retirement of some assets, and will need sustained commitment at government level. An example is that changes to low carbon heating in UK dwellings will require upgrading the fabric and systems of around a million homes annually for each of the next 30 years. That demands the development of a suitably skilled workforce in the hundreds of thousands, and investment of at least £10bn each year. Who will pay the costs, and how they can be recovered or justified at personal or corporate level remains to be agreed. Similar efforts will be needed in all countries, some of whom may not have the financial means to deliver them, so finance mechanisms to be discussed at COP26 are of real import.

Clearly the downward pressure on carbon emissions will challenge the existing oil and gas business models, and we are now at or close to the point of peak oil production.

Evidence can already be seen in the markets of caution over the future of the industry; the market capitalisation of Ørsted now roughly equals that of BP for instance. However, all is not bad news, as the importance of oil and gas will not disappear rapidly – although the nature of its use will probably change. The IEA’s latest World Energy Outlook projects natural gas supply remaining roughly at current levels until 2040, and oil supply doing the same or seeing a reduction of up to a third over the same timescale, depending on policies pursued internationally.

The difference will come in how these fuels are used. After a couple of decades of tentative exploration it seems probable that carbon capture and storage (CCS) technologies will become a significant means for countries to meet their emissions reduction goals, particularly in the industrial sector and as a route to produce low carbon energy vectors such as blue hydrogen. Gas remains attractive as a transition fuel, especially for those places where coal is currently exploited. The opportunity for the incumbent oil and gas companies to find new roles is there, but they will need to become advocates for change in how their products are used and leaders of the transition. An important and often overlooked aspect will be helping their current customers through the

changes they will need to make to stimulate demand for new means to provide energy.

Professor John Loughhead FREng

A green recovery The impact of COVID-19 on climate change mitigation efforts is still to be understood. Restrictions on travel and economic activity have caused an immediate reduction in emissions, but it is not clear to what extent this will rebound as vaccination is progressively implemented globally. Previous experience suggests travel will resume with time, so the main question is whether the economic cost of the pandemic will inhibit ability and willingness to change the system, or the need to stimulate economies will find energy transformation an attractive option.

Recent signals from the Biden team hint at decarbonisation of the electricity system, major deployment of electric vehicle (EV) chargers, and greening of buildings in the US by 2035, in addition to the $1.9tn stimulus package for direct COVID support. Meanwhile, the EU and UK have both declared intents to establish a ‘green recovery’.

In the UK, the announcement in November 2020 of a 10-point plan for a green industrial revolution with £12bn of public funding towards a total £50bn investment demonstrates intent, but details of exactly what will be done, and when, are still to be disclosed.

Importantly, making the required changes means tackling the activities increasingly difficult to decarbonise, as most of the lowhanging fruit has been exploited.

So, although a small contributor to global emissions, the UK’s performance will be influential.

As host of COP26, where increased commitments are sought; as the first country to adopt legal climate targets; and the first to commit in law to achieving net zero, the UK’s ability to demonstrate real progress against its increasingly challenging ambitions will be seen as proof of feasibility by many.

It is therefore significant that Alok Sharma is now committed full-time to his role as COP26 President, relinquishing his position as UK Business Secretary.

As a major statement of its intent to deliver a successful COP26, this is the first step by the UK government. But securing agreement to what is needed, and then showing domestic delivery, will be no easy task. We should wish him well. l

Petroleum Review | February 2021 15

Energy transition

OILFIELD SERVICES

Time to choose

Oilfield services are at a strategic crossroads, write Alan Barr, Craig Stevens and Adrian Del Maestro of PwC UK.

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ast year was a tumultuous 12 months for the oil and gas sector. An unprecedented twin shock to the system, first supply and then demand, as COVID-19 impacted the global economy.

WTI pricing went negative for the first time ever. And the scale of oil demand destruction (an estimated 9mn b/d for 2020 wiped out) has left uncertainty as to future consumption.

This turmoil resulted in widespread financial distress across the oil and gas sector, especially in oilfield services (OFS). The bitter irony is service companies had anticipated 2020 as a year of recovery and, for some owners, a year in which a mergers and acquisitions (M&A) window might open for them to sell their business.

Many had yet to recover fully from the 2014 oil price downturn and so COVID-19 introduced an extra level of stress into an already fragile ecosystem.

On top of all of this, the momentum of the energy transition is gathering pace as environmental, social and corporate governance (ESG) factors continue to reshape the oil and gas sector.

With a low carbon future rapidly taking shape, many OFS companies 16 Petroleum Review | February 2021

Given the increasing pace of the energy transition and its broader implications, oil and gas service companies are approaching a point in their lifecycle that will require them to choose between alternative strategic pathways Photo: Shutterstock

are looking towards new energy and assessing whether there is an opportunity to diversify, if they have a right to win in that space or whether they need to double down in oil and gas and become ever more efficient.

While the 2014 downturn was some time ago, the scars on the sector are still evident. The reduction in capital spend at the time led to significant cost and margin pressures for the OFS sector as well as impacting cash.

This was exacerbated by some operators exerting pressure on the supply chain to reduce costs further (as typically occurs in cyclical downturns). As a result, leverage in the sector has steadily increased.

According to data from Bloomberg, members of the World Oil Services Index saw collective debt rise from some $25bn in 2016 to nearly $43bn by the end of 2019 (almost a 70% increase).

To compound this challenge of rising debt levels, many service companies will see a share of this debt maturing in 2021, at precisely a time when earnings are softer.

Rystad Energy analysis suggests the well services segment (companies engaged in drilling, artificial lift, tubular products etc) will be

particularly exposed.

Whilst recent cycles saw comparatively fewer restructurings in the sector, COVID-19 contributed to a number of high profile cases in 2020, including drillers such as Valaris, Noble and Diamond Offshore who filed for Chapter 11 bankruptcy.

When government support measures eventually taper off, we fully expect restructuring to be a market theme for the current year, and not just limited to the ‘heavy asset’ owners.

In contrast to 2014, the scope to make material savings through efficiency gains and price deflation is more limited this time round. According to Rystad Energy, savings of 11% might be expected compared to nearly 40% in the wake of 2014, although any reductions will be keenly contested between customers and suppliers.

Given the sector has already cut out significant layers of costs, the supply chain will need to focus on areas such as improved project economics, partnerships and digital solutions to eke out further savings.

Against this challenging backdrop in core markets and with the energy transition emerging as the defining issue of our generation, how might OFS companies be affected by the move towards net zero?

Speed of transition Energy transition is reshaping the oil services sector – but the pace of change appears to vary depending on the operating region. So, for companies with a major footprint or a head office in Europe for example, the energy transition and ESG themes are likely to be higher up the corporate agenda. In areas where this transition is not front of mind, the impact will be less.

The supply chain will also evolve with its customers, with some of the major operators (such as BP, Total, Equinor, Repsol and Shell to name a few) setting the pace for decarbonisation. Whilst the transition efforts of the supply chain are perhaps less high profile, it is notable that some of the larger service companies already have strong credentials around decarbonisation, including the likes of Baker Hughes, Wood and Petrofac.

Energy transition

Needless to say, as this alignment gathers pace, we are likely to see tenders from some operators demanding credentials in decarbonisation from the supply chain. As this trend evolves, the low carbon credentials of a services company will become an area of significant competitive advantage.

Companies also need to consider the extent of, and timescale for, future activity levels in renewables markets being able to offset reductions in traditional hydrocarbons.

businesses, with the converse true of those that remain hydrocarbon heavy. The availability of finance will probably also be a driver of transition, with less funders for oil and gas likely in future.

As for the transferability of skills between oil and gas and low carbon, this is not always easy or evident. All service companies have core capabilities in a particular area – some may have skills that are transferable while others may struggle. The challenge is being able to identify the natural adjacencies in low carbon for oil services to play Towards low carbon in.

A strategic pivot to low carbon As illustrated in Figure 1, needs to be gradual and skills engineering houses with offshore transferability is not always easy experience, for example, are to achieve. To date, the move arguably well placed to benefit to lower carbon operations has from a diversification into low been a gradual one, partly due carbon (such as offshore wind – see to the timing of the ramp up in p19). For others, such as drillers, new energy markets but also as the transferability of skills is companies find their way in this less clear. While they have core new theatre. competencies that can be refocused We believe this gradual on geothermal opportunities for transition is a more likely pathway example, the potential to engage for the majority of OFS companies. in other low carbon areas may be And the likelihood is that legacy more limited. hydrocarbon-facing operations Aside from issues relating to will partially fund this evolution. skills transferability, several other Time will be needed for companies barriers could impede a successful to develop their capabilities and transition to low carbon. These credibility in low carbon and ‘hard range from having the ‘right’ brand pivot’ strategies clearly come with (that is no association with oil and higher risks. gas) when dealing with new energy M&A is a means by which developers to the complexity transition could be accelerated, with (and higher costs) associated complimentary skills, technologies with OFS solutions making them and credentials likely to be highly uncompetitive with other low sought after as entry points into carbon service providers. new markets. Premium valuations Despite the challenges, the are already starting to become supply chain has a long history evident for renewable-facing of innovation, which when

combined with its resilience and agility, places the sector in a strong position to help lead this energy transition. Needless to say, the skills associated with offshore and working in a hostile environment will be equally relevant.

A multi-faceted move There are a number of ways in which OFS companies can facilitate a move towards low carbon: Decarbonisation of OFS operations – Looking ahead, we expect to see more companies reporting details of their own carbon footprint.

Sustainability strategies will become part of the norm for companies, likely involving the creation of specialist functions to set the ambition and framework to address emissions and use of nature-based offsets.

More efficient delivery of client facing operations – Going forward the delivery of services to the oil and gas sector will need to evolve and become ever more efficient.

The widespread application of digital solutions, in the broadest sense, will be critical to delivering enhanced productivity. In fact, COVID-19 has accelerated the use of such technologies which have facilitated remote working, providing both a cost and environmental benefit.

Decarbonisation of clients’ operations – This ranges from OFS helping the operators through the deployment of carbon capture technologies to developing offshore wind farms (floating) to power platforms.

Transferability of Skills in Oil Services and Low Carbon

Skills Transferability

Seismic

Barriers

Plugging and abandonment can thrive in rapid energy transition.

OCTG for infrastructure related to CCUS and hydrogen

Opportunities for engineering houses with offshore expertise for wind farms. Broader skills for carbon storage and hydrogen production

EPCI

Well Services & Commodities Drilling and Workover

Less Fungible Services

Source: PwC Strategy& research

New Low Carbon Plays

Traditional Oil & Gas Oil Services Opportunities for seismic and broader geophysical and geotechnical services. Site investigation for subsea foundations for wind turbines

Figure 1: Transferability of skills in OFS and low carbon

Maintenance & Operations Drilling wells for carbon storage or geothermal plays

Plays in subsea cables for wind farms, electrification of offshore platforms

Subsea

Potential to support offshore wind farms, carbon storage and hydrogen infrastructure.

Inspection services, accommodation etc

Reskilling Costs

Legacy Brands

Attracting Talent

Debt Levels

Over-Engineered Solutions

For those companies looking to re-skill their work force, there may be concerns about how to pay for this.

Also there may be challenges around the flexibility of engineers to adapt to new ways of working.

Some oil service companies recognise several low carbon developers may be hostile to service providers with an oil and gas heritage.

Attract younger talent to the supply chain may be challenging given their oil and gas activities.

Conversely, a focus on low carbon may be a way to attract new talent.

Given the current environment, it may prove challenging to allocate resources to develop a low carbon business given the focus on cost reduction and cash preservation.

Operating in a hazardous environment, oil services had to develop solutions meeting very stringent H&S standards. These solutions may sometimes be unnecessarily complex and too expensive for low carbon applications.

More Fungible Services

Petroleum Review | February 2021 17

Energy transition

Diversify and provide low carbon services – As expertise in low carbon is built, increasingly OFS will have opportunities to work with clients outside their traditional customer base. Rather than responding to the requests of oil and gas operators they will be leading the deployment of low carbon solutions outside oil and gas, such as the decarbonisation of industrial clusters for example.

There is a natural cadence in this evolution. OFS will need first to lower their own carbon footprint to demonstrate how they can then help their clients do likewise. Thereafter, the supply chain will be better placed to diversify and provide more services to develop low carbon projects, such as carbon capture and hydrogen production.

Future energy mix For all the discussion on low carbon, the reality is that hydrocarbons will likely form a core staple of global energy demand for many years to come.

Transition is something that will happen over years rather than being a switch that can be flipped overnight.

Again, regional variations are evident with territories such as the Middle East still viewed as growth plays in oil and gas. The Gulf Cooperation Council for example, is seen by some as the ‘oil province of last resort’ and likely to be producing oil and gas for the foreseeable future.

For those OFS companies able to bring scale, technology and expertise at competitive prices to these territories, having a strategy focused solely on hydrocarbons is viable.

Time to choose a pathway Given the increasing pace of the energy transition and its broader implications, oil and gas service companies are approaching a point in their lifecycle that will require them to choose between alternative strategic pathways.

Some may decide to double down and focus on hydrocarbons.

But they will need to ensure they do so efficiently while maximising the adoption of digital solutions.

Others may decide that a gradual pivot to low carbon is the required pathway, with a smaller number of players pursuing a rapid transformation, in a similar vein to Ørsted (which evolved

from an upstream oil and gas company into a wind farm operator).

Each pathway will face challenges and the core capabilities of each service company will ultimately decide whether there are natural adjacencies in low carbon and hence a right to win. Moreover, each choice will have trade-offs.

So, for example, the high risk and high returns of upstream oil and gas will evolve into lower risk and lower returns in low carbon.

Either way the supply chain will need to navigate these choices.

‘The unsung workhorse of the oil and gas industry’ is an epithet often used to describe the OFS sector. And while it does reflect the ‘horsepower’ generated by the industry, it ignores the degree of innovation OFS companies bring. Innovation in terms of technology and engineering to ways of working.

It is precisely this ability to innovate that will position the sector for sustainable success. ●

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02/11/2020 10:38:42

Energy transition

OFFSHORE WIND

Commercial collaboration There are commercial opportunities for the oil and gas industry through collaboration with the UK’s offshore wind sector, write Westwood Energy’s David Linden, Head of Energy Transition, and Michelle Gomez, Senior Analyst, Offshore Wind.

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he UK’s path to reaching net zero by 2050 will require significant investment in new technologies and business models. The UK Continental Shelf (UKCS) is expected to see a decline in oil and gas production, with other offshore technologies – including hydrogen production; carbon capture, use and storage (CCUS); and offshore wind power – set for significant expansion.

The UK’s transition will only be successful through collaboration.

There are potential opportunities for synergy and between the offshore oil and gas and wind sectors.

The UK Committee for Climate Change’s (CCC) recently released Roadmap to net zero calls for 100 GW of offshore wind to be built – a 900% increase from today’s capacity.

To date, the UK’s oil and gas and wind sectors have largely operated in relative isolation from one another despite the installation of some 10 GW of offshore wind capacity. Synergies have not been effectively explored. However, this is now starting to change through joint initiatives such as the Energy Transition Alliance set up between the Oil & Gas Technology Centre (OGTC) and Offshore Renewable Energy (ORE) Catapult in July 2020.

The main commercial drivers for exploiting synergies across these two sectors are to: •

Reduce the levelised cost of electricity (LCOE) of offshore wind (especially floating wind) and support its continued growth.

•

Ensure the oil and gas sector’s skills, capabilities and infrastructure are leveraged to support the wind sector’s growth, as well as maintain the oil and gas sector’s own commercial viability.

Transfer of knowledge and capability The International Energy Agency’s (IEA) 2019 Offshore Wind Outlook report highlighted an opportunity for the oil and gas sector of up

Impression of the Hywind Tampen floating wind project, which will provide 35% of the annual power demand of five platforms Photo: Equinor

with the aim to retain the value of a local supply chain, including leveraging its oil and gas heritage.

Table 1 provides a summary of some of the trends from floating wind that create potential opportunities for the oil and gas supply chain.

Offshore floating wind is still at an early stage of development, with only 113 MW of capacity installed globally (of which just over 70 MW can be labelled as ‘commercial’). Standardisation will be needed in the design and development to create scale (and the underlying supply chain). to $350bn in European offshore The parts of the oil and gas wind over the next 20 years. This offshore supply chain that is based on the calculation that are currently servicing the ‘about 40% of the full lifetime costs offshore wind sector (primarily of a standard offshore wind project’ in engineering, procurement, has ‘significant synergies with the construction and installation offshore oil and gas sector’.

– EPCI) are at present doing There will be only certain so at very low prices. There is aspects of an offshore wind project uncertainty on whether rates can where the oil and gas industry can stay at such levels if activity ramps add value – for example, the supply up, especially if oil and gas activity of turbines is a well-established returns. Significant changes in and competitive industry, with rates could impact the accessibility little synergy with the oil and gas of the synergies between the two sector. However, it is the oil and gas sectors. industry’s experience in offshore To enter the market effectively, infrastructure that will be of most it will also be important for the benefit to the offshore wind sector, oil and gas sector to understand whether it be in foundations/ the differences in how the structures, project management, offshore wind market functions vessel operations, working with – including different tender moving cables, seabed survey/ processes, contracting terms, investigation, or balance of supplier relationships, the focus plant (BoP) operations and on innovation together with cost maintenance (O&M). The oilfield reduction etc. The oil and gas support/services sector also has sector is also not as accustomed to transferable assets and skills, such working with other stakeholders as in the provision of tugs, mooring – such as transmission/grid systems, heavy lifting vessels and operators – and will need to cabling. navigate a different landscape.

It is likely that increased synergies will be realised in Joint commercialisation floating wind as wind farms move There is also potential for further from shore and require collaboration of the two sectors more complex supply chain through oil and gas platform operations and activities, as this electrification and repurposing will require a set of capabilities existing infrastructure. that many offshore wind players Platform electrification can do not have. The UK hosted the create demand for the renewable world’s first commercial floating electricity generated by a (fixed or wind farm (Hywind Scotland) in floating) offshore wind farm that is 2017 and has now set itself a 1 GW in close proximity and displace gas target by 2030 for floating wind, and/or diesel power generation.

Petroleum Review | February 2021 19

Energy transition

Supply chain category

Floating wind trends that create opportunities for the oil and gas supply chain

Pre-front end engineering and design (FEED)/FEED

•

Increased engineering complexity as wind farms move further from shore

Engineering, procurement, construction and installation (EPCI)

•

Evolution of the type of EPC yards (from fixed foundations towards yards which can manufacture floating substructures)

•

Mooring of floating foundations (includes pre-lay mooring capability)

•

Evolution in both the nature and type of installation activity and assets required, including the use of offshore support vessels (OSVs)/multi-purpose supply vessels (MPSVs)/subsea construction assets (as opposed to wind turbine installation vessels – WTIVs) for floating wind farm installation (quayside integration/assembly)

•

Installation of subsea electrolysers/subsea substations/hydrogen pipes, including use of pipelay and subsea construction assets, as overlap between and combinations of offshore technologies increases

•

More complex offshore logistics and operations

•

Increased safety standards/HSE needs

•

Subsea inspection requirements

•

Need to consider end-of-life/decommissioning

Operations and maintenance (O&M)

Decommissioning

Note: This list is not exhaustive Table 1: Floating offshore wind trends – opportunities for the oil and gas supply chain

This can reduce emissions from the platform and make available fuel that once would have been burnt on the platform, extending the field’s life. On average ~5% of production is used offshore to power platforms.

This combination alone may justify the investment cost, but there are several technical challenges that need to be overcome. Offshore wind generated electricity is variable – therefore requiring backup, potentially in the form of batteries, hydrogen fuel cells or connection to the main grid. Equinor’s 88 MW Hywind Tampen floating wind project, for example, will only provide 35% of the annual power demand of the five platforms, illustrating some of the constraints of 100% variable power supply.

A balance needs to be struck between the benefit of platform electrification and the cost of achieving this. Platforms that are nearer to land could make power-from-shore a more viable alternative to offshore wind, while others may be too old to justify the necessary investment for the remaining life of the asset.

Existing oil and gas infrastructure can also be repurposed, primarily to support the development of the green hydrogen economy from offshore wind. Hydrogen can be produced at sea by electrolysis – either on a repurposed oil and gas platform, on an energy hub island (eg North Sea Wind Power Hub), or directly from an electrolyser housed in an offshore wind turbine. It can then be delivered back to shore through repurposed natural gas pipelines.

20 Petroleum Review | February 2021

The PosHYdon pilot project off the coast of the Netherlands is an example of this concept, bringing several partners together to realise the opportunity. Similar projects are being considered across the North Sea. The business case is based on reduced capital investment and O&M costs through the use of existing infrastructure, the lower cost of transportation of hydrogen versus electrons, and the value of using hydrogen as ‘storage’ for variable offshore wind (and using this energy when commercially favourable). The cost savings through using existing oil and gas infrastructure will vary depending on the state of the infrastructure available, whether it can be repurposed, the distance from shore of the facility, and the remaining asset life.

Projects need to be considered in the context of the market dynamics and subsidy regime in the UK. Joint developments with the oil and gas sector could be a benefit or hindrance as a route to market for renewable projects depending on the offshore wind capture price outlook (the average price achieved in the wholesale market when the wind blows), or the level of revenues already supported by a subsidy (such as the current Contract for Difference (CfD) regime) or power purchase agreement (PPA).

The emerging opportunity The opportunity that the synergy between oil and gas and offshore wind presents – in the UK and beyond – is becoming clearer, with impacts across the value chain:

Source: Westwood Energy

•

E&P companies are well positioned to deploy their capital and project management skills and, importantly, have a need to diversify their portfolio and to address the emissions intensity of their existing oil and gas production.

•

EPC contractors and the broader supply chain can support the design, manufacture, and installation of wind farms – with the most synergies likely to be realised in floating wind.

Further opportunities exist in supporting platform electrification and the repurposing of oil and gas infrastructure (primarily for green hydrogen).

But while there are synergies, the oil and gas community needs to recognise the differences between the two sectors to understand where the opportunity really lies and what value they can add.

Joint commercialisation concepts such as platform electrification by offshore wind are at an early stage of development, and there are technical and commercial hurdles still to overcome. Floating offshore wind – the area where the skill and knowledge transfer could be very strong – is also an emerging technology, for which the ambition needs to be turned into the reality. ●

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Energy transition

ALTERNATIVE FUELS

A fundamental shift A fundamental shift from fossil fuel-derived energy sources to clean alternatives is underway in Europe. Florent Andrillon of Capgemini Invent examines some of the options and challenges.*

T

ransportation in its many forms, including road, rail and shipping, currently produces over 1,200mn tCO2e/y and accounts for 30% of total emissions in the EU. Fossil fuel liquids are energy dense, convenient for logistics and are not easy to replace. They currently account for 72% of energy use in Europe.

The big challenge ahead is to free transport from liquid fossil fuel use and develop new clean technologies and associated infrastructure for sustainable and convenient private and public transportation.

There are three types of transport energy sources – synthetic liquid fuels, hydrogen and electricity – which combined with new mobility modes can directly contribute to decarbonisation. Capgemini Invent estimates that demand for transport energy will have to fall from 360mn toe today to around 200mn toe by 2050 in order to meet the Paris Agreement. The energy mix will be made up of 40mn toe synthetic liquids, 30mn toe biomass liquids and 50mn toe electricity, with a small share of fossil fuels of just 25mn toe, down from 340mn toe today.

Technology array An array of technologies is needed, with ‘high to low’ liquid dependency.

Synthetic liquid fuels – mostly for air and maritime use: Giga-scale synthetic fuels production facilities will be needed before 2030, located close to transport hubs, ports and airports. They will synthesise at scale carbon-based synthetic fuels such as kerosene, methanol or ethanol in plants consuming green hydrogen (using renewable energy for electrolysis) and carbon captured from industry (using a circular economy approach in industrial hubs). Ammonia will also play a role, particularly for marine transport.

Carbon-based synthetic fuels can be used by nearly all aeroplanes and marine vessels. But to run on ammonia, shipping vessels need to be retrofitted with dedicated fuel 22 Petroleum Review | February 2021

Projects are underway to develop electric truck transport for use along short-and mediumdistances by incentivising truck manufacturers to invest in electric technologies Photo: Volvo LIGHTS

cells and ammonia management systems.

Pure hydrogen – for intermediary marine, road and rail use: Pure hydrogen, combined with fuel cells, is an alternative to using liquid fuel for shorter range journeys and where electricity is not a solution due to battery limits and charging times. Europe must also focus on converting and developing new models of trucks, buses and other heavy-duty vehicles, and implement new infrastructures, installing charging points along all transport corridors and for captive fleet.

Ease of adoption and e-mobility is paramount. The European electric vehicle (EV) market is expected to reach an additional 6–7mn vehicles per year by 2030, with most net zero scenarios requiring 80% of passenger car stock to be electric by 2050. The key to this is a huge expansion in private and public charging infrastructure and access to vast quantities of lithium-ion (Li-ion) batteries.

Cheaper and more efficient batteries should be ‘made in Europe’: Industrial-scale battery production could be achieved in Europe by the development of 10 Li-ion gigafactories by 2030, supported by large-scale recycling factories to limit environmental impact.

New forms of urban mobility will be introduced: Ongoing proliferation of high-emission private motor vehicles carrying individuals is not compatible with the achievement of Europe’s net zero targets. However,

public transport alternatives are not always accessible, due to disjointed infrastructure, scattered data and multiple payment points.

We believe that public and free-floating transport systems must be developed, providing doorto-door flexibility, reliability and convenience, and offering a viable alternative to cars. Streamlined mobility systems offering multiple modes of shared transportation across Europe will be essential, accessed and paid for securely using standardised, user-friendly IT platforms.

Ambitious projects A range of ambitious projects are planned or currently underway across Europe, including the following.

Green e-fuel production for aviation: The goal is to create five facilities in major European airports for the production of e-fuels for aviation (e-kerosene) in strategic hubs, producing 500,000 t/y of green hydrogen and capturing 9.3mn tCO2/y.

Ideally, these will be located at major European cargo airports, coupled with a maritime port such as Hamburg, Amsterdam, Valencia/ Athens. Each location should be capable of producing 600,000 t/y of e-kerosene for aviation by 2030.

A total electrolyser capacity of 6 GW is needed. However, new technology is required to improve aircraft energy efficiency and e-kerosene production processes.

The €1.9bn market could create 28,000 jobs by 2030.

Green e-fuel for long-distance shipping: The aim is to create five port facilities across the EU, each dedicated to production of 1mn t/y of e-fuel for European and international cargo shipping by 2030, with 10.5 GW total electrolyser capacity, to drive down the cost of e-fuels (methanol) for cargo shipping. Development is underway by the Copenhagen municipality in partnership with transport operators Ørsted, Maersk, SAS and DSV Panalpina for an e-fuel factory by 2030.

Energy transition

The €3.6bn market could create 55,000 jobs by 2030.

Green ammonia production and logistics infrastructure for longdistance shipping: In line with a goal to convert 110% of long-distance merchant ships across the EU (1,160 ships) to ammonia fuel-cell propulsion engines, the aim is to reach 5mn t/y green fuel ammonia production, consuming 840,000 t/y of hydrogen from 2030. Scale-up depends on technological advances in ammonia-powered ships. The first such engine being developed by the ShipFC consortium project, NoGAPS, will be completed in 2023.

The €4.3bn market could create 65,000 jobs by 2030.

Shift short and medium-distance ferries to hydrogen fuel cell propulsion: The first goal is to launch the retrofit of 50% of European ferries to hydrogenpowered ships, each with a fuel cell power of 2 MW by 2030. The aim is production of 60,000 t/y of hydrogen for short-distance ships, using GW-scale electrolysers.

There are plans to identify five major EU ferry ports, in Norway, the Netherlands, Spain, Greece or Portugal, with easy access to green hydrogen production and renewable energy supply from nearby offshore wind parks or photovoltaic solar plants. Key projects include H2SHIPS, ZeFF and Seashuttle, Flagships, ShipFC (ammonia-powered engine retrofit), 2x40 GW Green Hydrogen Initiative, HYPOS, HySynGas, and Elekrolysefabriek. The €300mn market could cut CO2 emissions by 0.8mn tCO2e.

Develop hydrogen for heavyduty road freight: The goal is to pilot deployment of freight hydrogen corridors for Europe, which is currently limited by poor infrastructure penetration and reliability. The aim is to develop large hydrogen refuelling stations in 1,000 km of European heavy-duty truck freight network corridors, along nine large transport axes in the TEN-T (Trans-European Transport Network) programme.

Each hydrogen refuelling station will produce 1,000 kg/d of hydrogen. Related projects include GIFT for intercontinental corridor selection; FCH ReFuel for hydrogen infrastructure; H2ME1 and H2ME2 for expansion of the hydrogen vehicles fleet, fuelling stations and development of hydrogen production techniques; and the H2020 call for proposals for innovative hydrogen compressor technology.

Shift the European truck industry to hydrogen: There is currently no large-scale zero emission solution for commercial transport of goods by heavy vehicles. The goal is to accelerate development and testing of hydrogen heavy vehicles in five EU countries initially, leading to the production of 45,000 hydrogen-powered freight trucks by 2030, in line with the Hydrogen Roadmap for Europe programme.

The main stakeholders include national ministries of transport, local technology institutes, truck manufacturers such as Daimler Trucks, freight transport operators such as DHL, and logistic specialists like Schenker. Key projects include the FuelCellsWorks initiative, REVIVE (Refuse Vehicle Innovation and Validation in Europe), the Fuel Cells and Hydrogen Joint Undertaking (FCH JU), and the joint venture between Daimler Trucks and Volvo Group.

Transition of intercity trains to hydrogen: European fleets of diesel-powered trains need to be replaced by zero-emission transport solutions by deploying hydrogenpowered trains. Pilot projects are underway in line with the European Hydrogen Roadmap initiative, anticipating 570 hydrogen trains by 2030 and 9% share of all rail transport powered by hydrogen in Europe by 2050. Key stakeholders include railway manufacturers such as Alstom, and railway operators like SNCF in France (14 hydrogen trains by 2021), and Alstom and RMV in Germany (27 hydrogen trains by 2022).

Electrification of short-distance truck transport, waste collection and urban bus fleets: Over 70% of goods used daily are transported within and between cities via heavy duty trucks that are large CO2 emitters. Projects are underway to develop electric truck transport for use along short-and mediumdistances by incentivising truck manufacturers to invest in electric technologies. Significant initiatives include the Volvo FL truck with 16 tonnes capacity and 300 km range. The project aims at 10% share of EVs in the EU truck fleet by 2030, using public-private investment. Key initiatives include Volvo LIGHTS in the US, a publicprivate investment partnership between California Climate Investments and Volvo. There are also pioneering deployments of EVs for public transport, waste collection and postal deliveries, with 10 major EU cities scaling up implementation. Projects include the Paris RATP plan for 4,500 new

buses – 80% will be electric. French postal service La Poste has plans for massive deployment of light EVs for last-mile delivery.

Foster private EV charging infrastructure: As EV prices decline, access to charging infrastructure will soon be the only remaining barrier for EV uptake. The programme aims to reboost current incentive programmes across the EU with new subsidies and tax reduction schemes to encourage roll-out of private charging stations, at home and work. Key stakeholders include Delft University of Technology; smartlab innovations, Germany; Parking Energy, Finland; and clusters in the Netherlands, Germany, France and Italy. Private charging will be complemented by public chargers but will represent only 5% of total chargers.

Capgemini Invent estimates €16bn investment will be required, creating 24,000 jobs by 2030. Key projects include OSCD (Orchestrating Smart Charging in mass Deployment), led by TU Delft. UK initiatives are underway to install public charging pads in residential streets, car parks and taxi ranks. E.ONxClever and NEXT-E.ON are collaborating in Denmark’s eMSP Clever programme to establish a network of 180 ultrafast charging stations in seven countries, connecting Norway to Italy. Mega-E being implemented

by Allego in partnership with Finland’s Fortum, to develop a charging network of 322 ultra-fast chargers and 27 smart charging hubs across 20 central European and Scandinavian countries.

Reaping the reward Though the shift from fossilderived fuels to clean alternatives is challenging, the rewards are significant. Potentially creating a European industrial market worth €11bn/y by 2030, along with 1.1mn permanent jobs and avoiding 128mn tCO2/y on the road to net zero. ● *This article is based on the findings of the recently published Capgemini Invent report, Fit for net zero: 55 Tech quests to accelerate Europe’s recovery and pave the way to climate neutrality.

Petroleum Review | February 2021 23

Technology

INNOVATION

New frontiers for renewables Robotics, autonomous systems and other ambitious new technologies are being developed to optimise offshore wind operations and wave power to meet net zero targets. UK companies are spearheading this technological revolution with support from the Offshore Renewable Energy (ORE) Catapult. Brian Davis reports.

I

Bombora is working with TechnipFMC on the InSPIRE project to develop a floating offshore wind foundation incorporating Bombora’s mWave wave energy converter (artist’s impression pictured) Image: Bombora

nnovation is key to development of renewables technology on the road to net zero by mid-century. To get a perspective of the wideranging invention in this area, a recommended first port of call is the Offshore Renewable Energy (ORE) Catapult – one of 10 Catapults established in the UK to bring together start-ups, potential investors and industry experts in bespoke projects for offshore wind and wave power.

The ORE Catapult is not a grant giving body but also provides advanced testing and validation facilities as part of the package, located mainly but not solely in Blyth, Northumberland. There is also a 7 MW demonstration turbine in Fife, Scotland, to demonstrate new technologies pre-commercialisation and access data for research and development (R&D) purposes.

The flagship programme is testing the next generation of

24 Petroleum Review | February 2021

wind turbines in Blyth, to be deployed at Dogger Bank. This will be the world’s largest offshore wind farm, to be located 130 km off the north-east of England, capable of powering 6mn UK homes with generation capacity of 3.6 GW ultimately. A 107-metre long turbine blade manufactured by GE Renewable Energy is currently being tested for Dogger Bank wind farm developers SSE Renewables and Equinor.

ORE Catapult also does a lot of work with UK component suppliers to ensure that their components are compliant for wind farms.

A key area of focus is development of a new generation of operations and maintenance (O&M) systems for offshore wind farm assets. An O&M Centre of Excellence is being set up in Grimsby, the largest O&M port in the UK. The centre is aimed at driving moves towards remote operations using big data, artificial intelligence (AI), machine learning and robotics.

ORE Catapult works closely with major wind farm developers, including Equinor, SSE, RWE, Vattenfall, Ørsted and Scottish Power and Renewables, as well as companies throughout the supply chain. ‘There is particular emphasis on identifying crosssector solutions,’ explains Chris Hill, Director of Operational Performance, ORE Catapult. ‘We are trying to find companies

that support other sectors [like the oil and gas supply chain] whose expertise can be deployed in offshore renewables.’ ORE Catapult also works with sister organisations like the Digital Catapult for solutions around AI and big data, and the Satellite Applications Catapult for projects involving communications for remote offshore operations.

ORE Catapult has also established the Floating Offshore Wind Centre of Excellence (FOW CoE), which is currently run from Glasgow but planned for relocation in Aberdeen. The Centre works with partners including Total, Shell, EDF, Equinor, Mainstream Renewable Power, Green Investment Group, Northland Power, CIP, Green Investment Group, ESB and Ocean Winds, to accelerate build-out of floating wind farms, creating opportunities for the UK supply chain and driving innovation in manufacturing, installation and O&M. The FOW CoE collaborates with the Supergen ORE Hub for co-funded R&D projects, focused on floating offshore wind.

There is recognition of the value of cross-sector learning for the application of similar offshore concepts, such as semisubmersibles, SPAR buoys and tension leg platforms (TLPs).

‘All these concepts are being considered for floating wind developments and originated in oil and gas’, remarks Hill.

Technology

The fourth area of focus is marine wave and tidal technologies, based at the ORE Marine Energy Engineering Centre of Excellence in Pembroke, Wales.

About €100mn of EU structural funding is directed at developing two wave and tidal stream demonstration zones, with seabed agreements for three separate wave and tidal stream projects over the next five years.

Technology developers include Bombora with mWave in Pembroke, the Marine Energy Test Centre (META), Simec Atlantis Energy and Nova Innovation with tidal projects off northern Scotland and Shetland, and Minesto off the coast of Anglesey.

ORE Catapult is also involved in the Offshore Wind Growth Partnership, which came out of the Industrial Strategy Sector Deal and is run by ORE Catapult on behalf of the Offshore Wind Industry Council, which provides grants to companies in the supply chain.

The ORE Fit 4 Offshore Renewables (F4OR) business improvement programme is a unique service to help the UK supply chain get ready to bid for work in the offshore renewable energy sector. F4OR is designed for businesses with 10 or more employees or turnover exceeding £1mn and has a team to assess a company’s ability to supply offshore renewables in terms of engineering design, vessel service, health and safety training, etc.

F4OR is managed from Glasgow in partnership with the High Value Manufacturing (HVM) Catapult, with programmes running in East Anglia, north-east England and Scotland.

‘Clearly our programmes align with UK Prime Minister Boris Johnson’s 10-point Green Industrial Revolution Plan,’ says Hill. ‘The uplift in ambition to supply 40 GW of offshore wind by 2030 and plans for post-COVID recovery all point to much larger ambitions for the work we do and the challenges for us to keep up with supporting this fast-growing sector.’

So, let’s look more closely at a few of the projects. iFROG – robotic foundation inspection iFROG is an Innovate UK funded project, led by Cambridgebased robotics engineering firm InnoTecUK. Under a three-year research programme, InnoTecUK has applied a robotic solution for two of the wind sector’s biggest challenges – internal and external biofoul cleaning of monopiles, and

corrosion inspections in confined internal areas where build-up of hydrogen sulphide gas is a hazard.

Both problems pose serious safety problems for human inspection. iFROG is an amphibious climbing robot team for inspection and predictive maintenance of subsea foundations. It is capable of inspecting welds and repairing the foundation both above the waterline and down to 60 metres below the surface, and can navigate monopile interior walls using novel adhesion technologies.

Working in a team, the two robots can scan surfaces using nondestructive ultrasonic testing for accelerated inspection and qualitative data aquisition. iFROG can help operators manage issues such as internal corrosion, fatigue cracks, imperfections in welding and biofoul removal.

‘We’ve had interest from the wind industry, for oil and gas pipelines and ship hull inspection,’ says Robotics Engineer Panagiotis Karfakis.

InnoTecUK worked in partnership with The Welding Institute (TWI), Brunel Innovation Centre and ORE Catapult. ‘ORE Catapult was critical as a mediator between ourselves and the wind operators,’ says Karfakis. ‘They ensured we understood what the wind operators actually need, and also supported us with the test facility in Blyth, where a section of monopile was installed to carry out final trials and testing.’

Phase two of iFROG (ROB FMS) is underway for external cleaning and inspection using magnetic adhesion on the steel foundation, as opposed to the negative camber for internal monopile inspection and cleaning. iFROG is capable of semi-autonomous teleoperation and work is underway on automating some of the tasks, such as weld inspection and cleaning. mWave demonstration project Wave energy developer Bombora is currently completing a £19mn mWave demonstration project in Pembroke, Wales, part funded by a £13.4mn European Regional Development Fund grant through the Welsh government and strategic investor, Enzen. The 1.5 MW demonstrator is being trialled in Pembroke Dock later this year. At the same time, Bombora is working with global EPCI (engineering, procurement, construction and installation) contractor TechnipFMC on the InSPIRE project to develop a floating offshore wind foundation incorporating Bombora’s mWave.

Bombora has developed a membrane-style wave energy converter called mWave, which can be located in near shore or offshore sites with good wave resource to generate sustainable clean energy.

As waves pass over mWave, the rubber membranes pump air through a turbine to generate electricity. Electricity is transferred directly to shore via a submerged cable.

Phase 1 of the project is looking at development of a 12 MW demonstrator featuring an integrated 4 MW mWave system and 8 MW wind turbine on a shared floating platform, targeted for a European demo site for commissioning in 2023. Phase 2 proposes development of an 18 MW pre-commercial integrated 6 MW mWave and 12 MW wind turbine on a shared floating platform in deeper waters.

ORE Catapult carried out some of the techno-economic appraisal of combining mWave technology with offshore wind to examine the feasibility of co-location. Significant gains are promised from integrating mWave and wind on a single platform, generating 50% more power from seabed lease areas and 50% more consistent power than just utilising offshore wind.

‘The energy industry is calling for acceleration in the speed of energy transition progress. It is projected that 400 GW of floating offshore wind will be installed worldwide by 2050. This high growth market requires innovation to quickly reduce the levelised cost of energy (LCOE). Pairing ocean energy with offshore wind has the potential to be a gamechanger,’ says Sam Leighton, Managing Director of Bombora.

Leighton claims that integration of Bombora’s mWave in the foundation of floating offshore wind can deliver major benefits, including a 20% reduction in the cost of energy. ‘We are targeting an LCOE of €50 by 2030 and an installed base of 120 GW of integrated mWave and wind platforms by 2050. We are confident that with the right support mechanisms in place, mWave can bring about a faster roll-out of floating offshore wind.’

Bombora forecasts that over 2 GW of its floating integrated mWave and wind solution could be installed by 2030, generating sufficient electricity to supply 2mn homes.

MIMRee – autonomous inspection and repair One year on from launch, the MIMRee (multi-platform inspection and repair in extreme environments) project reports Petroleum Review | February 2021 25

Technology

breakthroughs in its quest to demonstrate an end-to-end autonomous inspection and repair system for offshore wind farms.

MIMRee was awarded a £4.2mn grant from Innovate UK to demonstrate an ambitious autonomous system capable of planning its own operational missions to offshore wind farms, where an autonomous mothership will scan moving turbine blades on approach, then launch teams of inspection drones carrying blade crawlers for inspection and repair of damaged blades.

The MIMRee mission planning software has been developed by Professor Sara Bernardini of Royal Holloway University, London, and her team, and has been integrated with an autonomous Thales vessel and inspection drones developed by a team from Manchester and Bristol universities. The drones have successfully coordinated launch, recovery and navigation of the vessel.

The Thales imaging system has achieved blur-free images of moving turbine blades at ORE Catapult’s 7 MW Levenmouth demonstration turbine off the coast of Fife, Scotland. Scanning blades for defects without stopping turbines for days at a time is considered a gamechanger for wind farm O&M operations.

One of the aims of the project is to demonstrate an integrated inspect and repair system for wind turbine blades, using the six-legged BladeBug robot developed by a London-based start-up, which was demonstrated scaling blade sections at ORE’s National Renewable Energy Centre in Blyth and at ORE Catapult’s Levenmouth demonstration turbine.

MIMRee also features an autonomous repair arm developed at the Royal College of Art Robotics Laboratory, which can rapidly switch between modules for cleaning, sanding and top-coating damaged areas of blades, for real-time feedback visualisation and human-in-theloop teleoperation of repair tasks via a user-interface. One operator could potentially supervise many robots using teleoperation.

Following experimentation with visible and short-wave infra-red image capture, Plant Integrity has produced the blade crawler’s non-destructive testing payload, using an advanced machine learning algorithm and a precision scanner for measurement of defects under 26 Petroleum Review | February 2021

more idealised (optimised) O&M philosophy through remotely monitored robotic missions.’

iFROG is an amphibious climbing robot team developed by InnoTecUK for inspection and predictive maintenance of subsea foundations Photo: InnoTecUK

a wide variety of ambient light conditions.

An electronic skin, called Wootzkin, developed by WootZano, enables the robot to ‘feel’ the surface of the blade, allowing the robot to determine the surface conditions of a blade, even in an extreme environment, using machine learning algorithms.

MIMRee is planned to be the world’s first fully autonomous system for maintenance and repair of offshore wind farms.

Real world testing is underway on demonstration turbines at ORE’s Wind Innovation Hub at Blyth, and Thales plans tests at Turnchapel Wharf. Commercial roll-out begins in June 2021.

According to Professor Bernardini: ‘The Offshore Wind Innovation Hub has created a roadmap for the use of autonomous systems for blade repair and intervention. It is expected that the technologies that make up MIMRee will be rolled out within a decade or sooner. MIMRee offers an ambitious glimpse into the future of O&M that helps identify some of the key practical, technical and regulatory barriers on this journey. The concept will inform future developments. There is also huge cross-sector potential for other ‘extreme environment’ industries, like the oil and gas sector, looking to implement a far

Offshore wind innovation competition winners Tethys Energy Services and Aerones recently won major backing to develop novel offshore blade maintenance technology.

The two companies won a blade robotics innovation competition launched by GE Renewable Energy, ORE Catapult and KTN, which called for robotics solutions focused on automating maintenance activities and reducing unplanned offshore activity during the O&M phase of offshore wind turbine blades.

Tethys and Aerones will deliver a new offshore transport and delivery system to enable the Aerones onshore wind robotics technology to work offshore. The system will deliver advanced remote inspection, maintenance and repair tasks on offshore wind turbine blades up to five times faster than using conventional rope access – drastically reducing turbine downtime. The system is also claimed to be more scalable and much safer to deploy, removing the need for personnel to work at height.

The next stage in development will see Tethys and Aerones demonstrate their prototype technology on ORE Catapult’s 7 MW Levenmouth demonstration turbine. GE Renewable Energy will provide technical support and guidance on how the technology could be used on the company’s offshore projects.

Looking ahead The adoption of robotics technology is considered to be vital for the offshore wind sector.

ORE Catapult research estimates that inspection costs could be reduced by almost 40% through integration of remote operations, robotics and automated systems into O&M activities.

It is a goal well worth going for in terms of offshore wind development nationally and internationally in the years ahead. These and other novel O&M offshore wind developments being facilitated

by ORE Catapult with leading wind farm operators and technology suppliers, many of whom are start-ups, promise to create a storm of commercial opportunities for coming decades on the road to net zero. l

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IP Week 2021

Q&A

Tackling a year of challenge The past year has been an opportunity to prove resilience in the face of a variety of challenges, says Nick Walker, President and CEO of Lundin Energy.

Given the challenges during 2020, what have been the key lessons for Lundin Energy? The past year has been incredibly challenging for society as a whole, as well as our sector specifically. The devastating impact of the COVID-19 pandemic on people’s health and the economy is likely to continue through 2021 and beyond. Lundin Energy puts the safety and wellbeing of our people first and has looked to handle the impact of the crisis with agility and adaptability. I am pleased to report that business continuity was not materially impacted, thanks to our dedicated workforce who worked tirelessly to ensure risks were mitigated where possible.

Whilst exploration and production activities were affected, the key activity continued largely to plan, with appropriate risk mitigation and monitoring. There was also good coordination with our business partners and the Norwegian Oil and Gas Association to ensure our efforts were aligned with the wider industry response.

and opportunities presented by the energy transition will not, however, manifest themselves overnight. While alternative energy sources and renewable power will play a critical role, oil and gas will still account for approximately half of the world’s energy needs in 2040.

Since the production of oil and gas is responsible for emitting about 5–8% of global emissions, if we are to meet global climate goals it is critical for our business to decarbonise production in order to continue to provide the energy the world so crucially demands for decades to come in the most responsible manner and with the lowest emissions possible.

To that end, Lundin Energy is well-positioned as we aim to decarbonise our production and achieve carbon neutrality by 2025.

What is Lundin Energy doing to decarbonise and meet the goals of the Paris Agreement? Through our Decarbonisation Strategy, we have defined an ambitious roadmap and set challenging targets. To achieve What are the company’s ambitions in carbon neutrality from 2025 we terms of future development on the are investing $750mn to decrease Norwegian Continental Shelf? We our absolute operational emissions have focused our business solely as well as neutralise hard-toon Norway because it is clear there abate emissions. We aim to cut is a huge amount of value to be our carbon intensity per barrel by derived from a jurisdiction that has over 60%, from 5.4kg CO2 in 2019 a significant undeveloped offshore to less than 2kg CO2 by 2023. Key resource potential and one that has actions include the electrification such a supportive fiscal framework. of our main producing assets, Our ambition in Norway into the increased production efficiency, next decade is to continue to drive use of best available technologies, our organic growth model, growing and investments in renewable our resource base and production energy projects to replace 100% of portfolio, whilst at the same time our net electricity consumption. focusing on delivering one of the Once electrification of our main most efficient barrels from a cost asset, Edvard Grieg, is completed, perspective and one of the lowest over 95% of our total production CO2 emissions per barrel. will be electrified, using low carbon electricity from the Norwegian How do you view Lundin Energy’s role grid. Furthermore, our investments in terms of the energy transition? in a wind farm in Finland and We believe our role is to develop a hydropower plant in Norway oil and gas resources efficiently will together produce around and responsibly for a sustainable 300 GWh/y – enough to power and lower carbon energy future.

75,000 households. From these Lundin Energy supplies energy to decarbonisation actions, by 2023 a changing world with a growing our carbon performance will be population and an increased about 10 times better than the appetite for energy. The challenges industry average.

28 Petroleum Review | February 2021

Nick Walker, President and CEO, Lundin Energy Photo: Lundin Energy

IP Week will be taking place as a three-day virtual event on 23–25 February 2021.

Reduced rates apply to EI members. Visit www.ipweek.co.uk

Last, but not least, we will use natural carbon capture to neutralise residual hard-to-abate emissions from our operations.

Between 2021 and 2025, we will invest in proprietary reforestation projects in a range of locations. We will plant trees on degraded land that will capture millions of tonnes of CO2, while helping to protect ecosystems and provide positive local economic benefits What should be the priorities at COP26 for industry decarbonisation?

Our experience in Norway shows how a progressive regulatory landscape and sufficiently high carbon taxes help companies innovate to become efficient and low carbon. It is crucial that governments learn from the experience of countries and regions who have implemented such measures. Fiscal instruments to incentivise innovation are highly powerful, provided they are implemented correctly.

Furthermore, we need many countries to increase their level of ambition on emission reduction targets in order to reduce the likelihood of a temperature rise over 2oC. The forecast temperature increase under current policies is above 3oC, which is not acceptable or economic.

The oil and gas industry will remain relevant through the next few decades, to provide the energy the world still needs, but it needs investment to decarbonise highcarbon assets and become more efficient. This means that lenders and investors need the right policy signals from COP26 that enable them to continue supporting the oil and gas sector (alongside other industries) to decarbonise and achieve the Paris Agreement goals while meeting the needs of a growing population. ●

Oil and Gas 2021 Training Courses Introduction to the Oil & Gas Industry

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19–20 & 22–23 April, online This course will give you an insight into managing ageing and life extension of offshore structures.

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Self Paced eLearning & 6–7 May, online This course provides delegates with a comprehensive overview of energy storage systems as we transition from fossil fuel based energy to renewable energy sources looking into the power and oil and gas sectors.

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20-21 September, classroom This course provides an overview of principal activities in the international upstream, midstream and downstream petroleum industry.

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