Transitioning to a low carbon economy has firmly entered the global public conscience, albeit with divergent views not only on how to achieve it but also who should pay for it and what timescale it should be achieved in. Advanced economies want the world to go from low to net zero carbon by 2050, while the burgeoning emerging economies think 2060 to 2070 might be more feasible.
Caught in the crosshairs are the energy companies, especially oil and gas producers, who are poster bearers of a hydrocarbon predicated global economic system they have been instrumental in fueling for decades. But 20 of the largest oil and gas companies have pledged to be achieve net zero by 2050, as well as eliminate routine gas flaring by 2030. Industry-wide, their peers are also making commitments of varying degrees, whether they are skeptics or believers.
At the recently concluded energy conference ADIPEC in Abu Dhabi, United Arab Emirates, all the talk was about “Decarbonising. Faster. Together.” – more of a rallying cry than an event marketing tagline, and eye-catching however you look at it. Among the 184,000 attendees at the mega event held from October 2 to 5, 2023, energy CEOs and Ministers hobnobbed and discussed ways to “fast-track” the energy transition.
Their dialogs acquired an even greater significance as ADIPEC served as an unofficial curtain raiser to the United Nations COP28 summit, which the UAE is hosting from November 30 to December 12, 2023. Everyone acknowledged the difficult road ahead and the energy sustainability trilemma (sustainability, security and affordability) – i.e., how focusing on one aspect at the cost of the other could have – in the words of many participants – “serious” consequences.
But many of the answers the industry seeks can indeed be provided by human ingenuity and technology predicated on upscaling emerging solutions furthered by big data analytics, artificial intelligence (AI), advanced robotics and cleantech research.
Collaborative understanding of a complex problem
Industry stalwarts say collaboration is key. For Antonio Pietri, CEO of industrial software firm Aspentech, energy sector clients are morphing into what he describes as “partners in progress” towards an end goal of a net zero economy.
“And we’re not just talking about collaboration with energy companies on specific projects. We’re talking about devising low carbon ecosystems, working with consulting companies, cloud providers, and the world of academia on everything from emissions management tracking solutions to the viability of hydrogen projects,” Pietri told Forbes.
He also noted how many energy majors have rapidly realized that technologies premised on enhancing efficiencies – development of which picked up in the previous downturn – can also be used to further sustainability alongside profitability in good times, and operational prudency in challenging ones.
For Brandon Spencer, President of Energy Industries at ABB, the greenest unit of energy is the one you don’t consume. “As an industry vendor we see partners and clients increasing their focus and capital expenditure (capex) on energy management solutions to serve a dual purpose – reducing operating expenditure (opex) and meeting emissions targets. We’re talking everything from LNG Terminals to refineries and much else in between when it comes to energy management.”
Democratizing ‘Big Data’
To optimize, energy majors need to assess both legacy infrastructure as well as new build on the horizon. In the digital age that assessment is by default data driven.
“Advanced data analytics for value chain assessment and optimization is either already the norm or is fast becoming the norm. Anything that follows from AI to the Industrial Internet of Things (IIoT) is predicated on the input of, and learnings from, data. Simply put, data is the new oil, and its value cannot be understated,” said Saravan Penubarthi, Chief Technology Officer of AiQ, an AI solutions provider to the oil and gas industry.
That push is palpable. Rubbing shoulders with those marketing drill bits, pumps and motors, are the likes of Microsoft, Google and Amazon Web Services marketing ‘Big Data’ and cloud computing solutions. For Rashesh Mody, EVP Business Strategy at Schneider Electric’s industrial software subsidiary AVEVA, it’s not about the size of your data, but rather how you use it.
“Big data is only big if you if democratize it. In partnership with the industry, we are democratizing data. We help energy companies gather data across their various business segments and assets, and then correlate it with their operational data to put together a model for decarbonization, as well as help them make it happen.”
Furthermore, such learnings can then be taken not by just one client or partner, but by the whole of the energy community. “That’s an industry-wide data influenced contextual engine to help energy majors build applications for process efficiencies and deliver value without the need to reinvent the wheel.”
Reverse engineering, venture funding and AI
The energy industry is proactively figuring out its strengths and weaknesses on the march to net zero. “Over the last three years we’ve noticed our customers seek out very specific companies they can partner with to get them on their way to a low carbon destination and play a role in the energy transition,” said Aspentech’s Pietri.
That has led to pleasantly surprising reverse engineering outcomes, he added. “In December (2022), we started marketing and commercialized an integrated modelling and optimization solution that will enable capital intensive industries to achieve practical and economic solutions for Carbon Capture and Utilization (CCU). But the product itself, licensed by us, was developed by Aramco collaboratively with the Korea Advanced Institute of Science & Technology (KAIST).”
Anecdotal evidence gathered at ADIPEC also suggested both energy majors and vendors are retuning their venture funding structures. For instance, ABB’s Spencer said his company has now switched from a more centralized venture funding model to delegating the task of seeking and buying promising cleantech and low carbon technologies to its 20 business divisions. “That includes my own, under ABB’s four core business areas of electrification, motion, process automation and robotics.”
While every region and company’s agility levels vary, AVEVA’s Mody recounted energy projects aimed at efficiencies and decarbonization that used to take 9-12 months are now taking three months to complete. “New technologies and better utilization of data is providing value faster for many energy players, if not all.”
AI is helping with decarbonization to an extent many don’t realize, according to AiQ’s Penubarthi. “Instead, all you hear are scare stories. AI is not here to replace humans but rather to redeploy our skillset in a different segment of the decarbonization journey and a changing global economy.”
Mody noted: “Our AI helps connect simulation data with the real data, feeds it to an optimization engine. A human being can then find the gaps, put in the prescriptive analytics and make processes better and less carbon intensive – what’s not to like?”
Advancements in the software industrials complex are also helping vendors create low carbon solutions that are both platform agnostic as well as deployable on legacy oil and gas infrastructure.
However, the technologists themselves point to one critical element needed for decarbonization without which there is likely to very little progress – the willpower to allocate incremental capex, or ‘petrodollars’ if you wish, towards changing both operational and thought processes, as well as the energy mix.
Where there’s a will there’s a ‘tech pathway’
The world is not in denial about the challenges we face, said Vineet Mittal, Chairman of renewable energy firm Avaada Group. “We are finally realizing that climate change is not some kind of Y2K scare, but rather a very pressing global issue that needs to be urgently addressed, and the technology is there too.”
Energy majors are aware that advanced technology can facilitate round the clock green power from wind, solar and hydro batteries combined. “In that sense, the power sector can be decarbonized quite easily. However, the rest of the energy and industrials complex needs to catch up. The targets and desire are there – what’s needed are strong mandates and greater capital allocation. As of now, all I see is “chump change” being offered for the global energy transition and hope that this will change.”
The chump change charge does stick. For an oil major to actually be considered a major player – a reasonable benchmark to be applied is a production level of at least 1 million barrels per day. Taking an average oil price of say $85 per barrel, you’d be looking at $85,000,000 per day in revenue. So, when many talk of allocating $1 billion a year towards low carbon solutions – that’s less than a day’s takings for the biggest in the oil and gas business.
But the winds of change are picking up pace. The International Energy Agency (IEA) estimates that clean energy will receive 70% more investment than fossil fuels in 2023. Solar energy alone may receive more aggregate investment than oil, equivalent to more than $1 billion per day – a first in the history of the energy industry.
“Of course, you can’t just cut off oil and gas or ignore the fact that it’s a cyclical industry. Previous energy transitions involved a switching to a denser fuel for cheaper. Our current energy transition involves a less dense fuel that’s (currently) costlier. Governments are going to have to be involved further and shareholders will have to be onboard with companies to push wholesale changes alongside the technologists,” said ABB’s Spencer.
And sector spending on sustainability is rising even as companies continue to maintain their capex on oil and gas. “They are also on a learning curve of introducing renewables by leveraging the capabilities of utilities companies,” noted Aspentech’s Pietri.
“In terms of the future, from biofuels to CCU and hydrogen – the Europeans are the first movers, the Americans are catching up, and Asia is finding its own calling when it comes to optimizing everything from refineries to electricity grids. While plenty of work needs to be done, there are also plenty of reasons to be optimistic.”
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