Guest
Comment Reid Brooks Director, Opportune LLP, USA
O
ur Managing Partner David Baggett has a tradition of distilling his view on the year ahead into words like “scrappy” or “resilient” at our firm’s annual meetings. Hindsight being 20/20, “perseverance” seems appropriate to describe the personal and professional hardships many felt during a difficult 2020. With most of 2021 in front of us, I feel strongly that “adapt” would be the right word to describe the year ahead. Coming out of the toughest commodity price environment in recent history, companies across the energy value chain will now be required to reinvent themselves if they hope to survive as the world changes around them. Competition for investment dollars now hinges on how well a company can demonstrate stewardship of environmental, social and governance (ESG) principles in operating their businesses. The Biden administration, less than a week into its first term, issued numerous executive orders with farreaching consequences to oil and gas. Most notably for pipeline operators, the cancellation of Keystone XL’s permits signalled a shifting of the trade winds yet again on the project, which has spanned three administrations and endured a barrage of lawsuits. As a result of this and other recentlyscuttled pipeline projects, some midstream executives have questioned the ability to ever again develop greenfield long-haul pipelines.1 Many believe natural gas will represent the bridge fossil fuel over the next 10 to 20 years.2 This is especially true for power generation and local distribution utilities that rely on an uninterrupted supply of natural gas. With mounting pressure by investors to achieve net-zero emissions targets, many utilities are beginning to rethink their investment strategies, which could result in a quicker pivot to renewables. The decline in the role of natural gas as a bridge fuel will be hastened without bold and decisive actions taken by pipeline operators to reduce or eliminate emissions. The midstream entities who survive will do so by embracing these fundamental changes and adapting. Midstream companies like Enbridge and Williams, among others, have taken bold steps pledging net-zero – or significantly reduced – emissions targets through a combination of infrastructure
investments such as leak detection and repair, carbon offset credits, carbon capture and increasing the use of renewable power generation for operations. While certain of the technologies required to reach these aggressive emissions targets don’t yet exist on an industrial scale, it is the faith in innovation to overcome these technological barriers that will create new opportunities for pipeline operators. In much the same way that domestic oil and gas was reinvented by the advent of newer and more efficient exploration and production technology like hydraulic fracturing, pipeline operators now have the ability to redefine themselves as well. While large-scale pipeline-related infrastructure development projects have fallen out of favour, technology such as carbon capture and sequestration (CCS) may create new investment opportunities while contributing to reduced emissions. Improvements in technology like LIDAR-based methane detection and flare-eliminating emission-less blowdown equipment will contribute to a pipeline operator’s ability to minimise emissions events more economically during routine operations and maintenance. Midstream energy companies, now more than ever, have many platforms by which they can communicate their commitment to embracing ESG. Sustainability reports, investor presentations and social media all represent opportunities for pipeline operators to demonstrate their commitment to creating a sustainable approach to business. However, businesses will be defined not by the quality of these reports or the frequency of social media posts, but by taking many small, meaningful steps towards aggressive goals they set for themselves across all facets of ESG. These bold promises will create opportunities for innovation and the ability to prolong the use of natural gas to ensure both domestic and foreign supplies of clean, affordable and reliable energy to continue to power the economy of the 21st century.
THE DECLINE OF NATURAL GAS...WILL BE HASTENED WITHOUT BOLD AND DECISIVE ACTIONS TAKEN BY PIPELINE OPERATORS
1. 2.
https;//www.bloomberg.com/news/articles/2021-01-10/biden-blockingkeystone-threatens-to-end-era-of-mega-pipelines https://www.spglobal.com/ratings/en/research/articles/200924-theenergy-transition-covid-19-undermines-the-role-of-gas-as-a-bridgefuel-11667239