Renewable Energy Solutions For Oil And Gas Industry

An ideal solution for the Oil & Gas industry is to thrive, survive, and lead a low-carbon energy transition.

Many oil and gas companies are expanding into renewable energy- some of them in a big way. However, many experts do not believe that the sector will disappear anytime soon, and the industry is likely to embrace hydrogen and carbon capture technologies in the future.

Renewable refers to resources that can grow again or will never exhaust themselves or repair themselves in line with their use. Resources that can supply a source of continuous clean energy.

The companies could use renewable energy and new technologies to hedge against demand risk or to decarbonize their operation and leverage their market development and supply chain expertise to support low carbon energy deployment across the industry.

Transport and industry sectors have contributed significantly to a dramatic rise in energy needs in the past two centuries. However, fossil fuels emit pollutants and have limited reserves. Today, the world faces a severe challenge: the energy crisis and these resources are running out fast.

Besides producing considerable increases in greenhouse gases (GHG), oil and gas face the end of their life cycles. Over the past few years, many scientists have joined forces to warn about climate change, primarily due to burning oil and gas for energy.

The environmental movement has become more focused on renewable resources, both economically and politically. The energy derived from renewable resources is far more efficient than from nonrenewable resources such as coal, oil, and gas. Renewable resources can be costly to use on a large scale, and their use will require further research before they are cost-effective.

Oil and gas companies need to respond to a changing policy and investment landscape while evolving to promote long-term decarbonization of the energy system rather than simply supporting it. For the oil and gas industry, various solutions are available to produce renewable energy and let's read a few of them.

A Possible Strategy For Renewable Energy Solutions

Decarbonization can happen in many different ways, and its speed and direction can vary widely. The oil and gas industry is adapting to understand its role in the transition. Thus, each company's low carbon transition occurs according to its own set of strategic adjustments, which can vary widely from one company to the next.

Diverse responses are geographic location, value chain positions, asset mix, and location in the oil and gas value chain. In addition to the obvious factors, significant ones that help explain the variation in oil and gas company responses include shareholder activism, access to long-term patient capital, quality of government policy on low-carbon transitions in critical markets, and the ability to invest resources R&D, and investor relations.

1. Investment in downstream gas infrastructure

Natural gas demand can be sustained through investments in downstream gas infrastructure (LNG terminals, etc.). The development of these outlets can encourage the shift from oil to gas and enable a sustainable future. Moreover, a hydrogen economy or charging infrastructure for electric vehicles are other ways for producers to build on their project management expertise and strong balance sheets and enable renewables and provide firming power.

2. Electrification and coal-to-gas fuel switching

Gas producers have strategies that provide them with a means of protection against environmental risks that are not available to oil producers, at least not to the same degree. Even with a low-carbon future, natural gas will play an essential, if cloudy, role in complementing renewables and meeting the rising demand for energy, 2050-particularly as a cleaner replacement for coal power.

A critical competitive advantage for oil and gas companies will be their ability to link the integrated low carbon opportunities along the value chain of gas and electricity.

3. Decarbonization of oil and gas

A key strategy is to develop decarbonized oil and gas to respond to the low-carbon transition. Reducing oil and gas production's carbon footprint and climate impacts is possible by improving efficiencies and using new technologies. We will mainly focus on Scope I emissions, which are those from upstream oil and gas production. On the other hand, programs like hydrogen would further reduce decarbonization rates within Scope II and Scope III, indirect emissions, and customer emissions. These programs would include:

• Methane Emissions Efficiency: Natural gas producers can reduce their methane emissions reasonably. Most of the methane emissions are profitable or inexpensive to reduce.

• Zero-Emissions Production: Upstream oil and gas production and LNG production need to be zero-emissions if Scope I objectives are met. Hydroelectric power production is one example.

• Carbon Capture Technology: In addition to CCS and CCUS, hydrocarbon production can also be decarbonized through sulphur capture at the wellhead and the use of hydrocarbons captured at the point of generation. This can be in power generation, refining, or petrochemicals.

• Hydrogen: Among the most promising ways to decarbonize petroleum is hydrogen. A "blue hydrogen" option while combining steam reforming and CCS, or "green hydrogen," utilising solar or hydroelectric power for "electricity to liquids" electrolysis. Regardless of how a liquid fuel is produced, neither emits any emissions and is more energy-dense, making it more suitable for heavy transport than batteries.

4. Stranded asset hedges based on geography

Investing in infrastructure can help the industry focus on a demand centre and lock in demand. At this stage, national oil companies have taken some of the most striking steps, investing structurally in the fast-growing regions of southeast Asia and India with high oil and gas demand. Another key to a successful low carbon transition is the influence of national oil companies on geopolitics. Historically, state-to-state geopolitical partnerships have been crucial to reducing risks associated with fixed asset investments made in riskier emerging markets.

5. Investment and diversification in renewable energy

The portfolio of an oil and gas company that invests in decarbonization and efficiency technologies may be diversified. Investments in such companies include venture capital investments, through which companies focusing on micro-grids, battery technology, electric vehicles, and other technologies can be supported.

Major fossil fuel companies have been investing heavily in renewable energy as a cornerstone of the conversation. This is when it comes to how the oil and gas industry can adapt and contribute to the low carbon transition. The question that IOCs are more suited to tackle is less about which renewable technologies they will invest in and how they will support them. As renewable technologies evolve, IOCs may be better positioned to make informed investments.

6. Business models based on climate-based ESG principles

Various oil and gas companies have already implemented ESG policies to respond to environmental and societal pressures. They have established their relationships with environmental standards and ensure that environmental standards meet at each level of the organisation and production.

Companies that demonstrate a solid business case for net-zero emissions are more likely to be able to attract sustaining capital to scale those strategies and technologies that will represent what amounts to a massive change in their legacy business models. The low-carbon transition will intensify the pressure on companies to implement ESG policies, and policies with considerable depth and implementation track records will be a source of credibility with policymakers and investors.

Final Thoughts

The oil and gas sector must take a proactive role in responding to the low-carbon energy transition by understanding its role in global energy demand growth and combining it with the needs and expectations of a no-carbon future. The alliance must then communicate its vision and guide its peers to take similar steps, building structures that provide high-energy growth, low-carbon pathways for the future with the oil and gas sector, the alternative energy industry, and policymakers by following the following crucial steps:

• It is establishing low-carbon business models that are not only low-carbon but also profitable and easily understandable for markets and other stakeholders.

• To develop a science-based, objective, and accessible ESG metrics drafted by governments and independently audited. To qualify, investors must be able to compare these financial disclosures to other forms of financial disclosure required and regulated by governments.

• A bottom-up national determined contribution model models net-zero emissions and circular economies following the Paris Agreement.

• We should develop a workforce strategy that leverages the above to restore the oil and gas industry's attractiveness to younger talent. This will reduce the industry's ESG footprint and stranded asset risk.

As a result, the oil and gas sector can survive the low-carbon transition and evolve, thrive, and even achieve a leadership role in transitioning to an energy system that relies on wind, solar, and nuclear power.