Global energy demand stands to grow as much as 50% by 2050 and it is expected to increase in developing economies, such as Bahrain, until 2035, and perhaps even beyond. 

 

However, it is unclear how much of that energy will be supplied by the oil and gas industry in its current form, writes Jeyapriya Partiban, Partner and Head of Advisory at KPMG in Bahrain.

 

Meanwhile, excess production capacity, a collapse in commodity prices, and equity market volatility have led to the loss of billions of dollars in energy company stock value and bond depreciation. 

 

All these developments have cascading ramifications for an industry that only recently trimmed back costs to adjust to the 2014 price collapse.

 

However, every coin has a flip side! these challenges mean that oil and gas companies have an opportunity to adopt new, clean-energy business models that can support their recovery and generate growth in a net-zero future. 

 

Corporate leaders are increasingly focused on addressing risks to their organisations from climate change. Oil and gas executives are no exception. According to a survey by KPMG and Eversheds Sutherland, “Climate change and corporate value: What companies really think" of more than 500 global business executives; 93% of business leaders said that that decarbonisation is a key to succeeding in a net-zero global economy, the highest response of any sector. Also, 97% agree that their ability to manage climate-related risk is important for keeping their jobs over the next five years.

 

There are numerous opportunities for oil and gas companies to leverage their strengths, capabilities, adjacencies, and investments to date. While there are competitors from other sectors entering each of these markets, we strongly believe that the oil and gas industry has natural advantages that will allow companies to take a leading role.

 

RENEWABLES 

Solar- and wind-based power generation are gaining worldwide momentum. Production volumes for renewable energy, particularly wind and solar, have grown rapidly; US-installed wind assets now exceed 100,000 MW and solar assets exceed 66,600 MW. 

 

These facilities are expected to bring more new generating capacity online than natural gas over the next three years. In Bahrain we are also seeing an increasing number of articles and announcements through the support of the Sustainable Energy Authority wherein corporates across the Kingdom are in fact investing quite actively in the potential of renewable energy. 

 

Oil and gas companies and the constellation of companies that support them are keenly aware of how to build and operate in an offshore environment. Renewable sources including ‘Wind energy’ provides an excellent opportunity to develop new energy service markets and even activate idled onshore and offshore infrastructures, equipment, and personnel more effectively.

 

HYDROGEN 

The most ubiquitous energy source is finally having its moment! Hydrogen is an increasingly attractive option for decarbonising electricity, heating, transport, and industrial processes, among other scenarios. While utilising electrolysis to produce hydrogen from water requires considerable electricity, the price of solar and wind to power electrolysis continues to rapidly decline. However, experts in the field of renewable energy are significantly hedging their bets behind Hydrogen as the future of renewables.

 

BIOFUELS 

Next-generation biofuels are receiving a significant boost by government agencies and research universities that are exploring a wide array of next-generation biofuel pathways: biodiesel; hydro-isomerised fats and oils; biomass pyrolysis-derived diesel; cellulose-derived oxygenates;  ethanol, butanol, and similar long-chain alcohols; biomass  pyrolysis-derived gasoline; and  cellulose-derived oxygenates. 

 

Oil and gas companies could open or transition existing facilities for low-carbon fuel manufacturing in or adjacent to jurisdictions with applicable markets and potentially operate more efficiently and effectively than these less-experienced producers. This is also an opportunity for the kingdom as we look towards diversifying the marketplace opportunities with the aim to reinforce the economy.

 

COMMERCIAL TRANSPORTATION 

Transportation represents the single most significant opportunity to kick-start large-scale acceptance of low-carbon energy. 

 

Battery manufacturing costs have declined an average of 18 percent annually over the last decade. As prices continue to fall, the business case for battery-powered trucking becomes more favourable. 

 

Electric commercial trucking is one-way companies can improve efficiencies and meet carbon emissions targets. While the utility industry has made greater inroads in establishing charging stations than oil and gas, companies with a downstream footprint to leverage on the highways can consider building charging stations at warehouses and manufacturing facilities.

 

As a kingdom we are already experiencing a significant investment in this space with the recently revamped public transportation system of Bahrain Bus, and the recently announce project updates around the Bahrain Metro. Are we applying a sustainability impact lens around the investment is a critical question we need to ask ourselves? 

 

CARBON CAPTURE, UTILISATION AND STORAGE 

Removing carbon from industrial sources and the atmosphere is a critical component of the transition to a “net-zero energy system. Typically, oil and gas companies and organisations within the manufacturing/ industrial sector who traditionally have been quite energy intensive have a great deal of experience developing large, highly complex industrial facilities. 

 

This puts the industry in a strong position to build and operate carbon-capture and sequestration facilities not only for themselves, but also for other companies across all sectors who lack the ability or desire to directly operate their own i.e. airlines and commercial real estate companies. 

 

The journey to a sustainable, low-impact business model that is responsive, adaptive, and resilient to these changes can be challenging. Therefore, leaders across public and private sector in Bahrain and worldwide must respond to a range of economic, environmental, and social considerations including energy and fuel use, climate impact, operational decarbonisation, water use, and resource scarcity as they plan and execute the future strategy for their organisations to ensure they are also working in coordination with national development.-- TradeArabia News Service