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The carbon and digital energy transition

Thursday, January 23, 2020

Christina Figueres, former executive secretary of the United Nations Framework Convention on Climate Change (UNFCC), AkerBP, Shell and TechnipFMC discuss what the ‘energy transition’ means to them.

Christiana Figueres said that the oil and gas industry is seeing increasing competition, such as from oil in vehicle fuels being replaced by electric powered vehicles, and gas power demand being replaced by renewables.

'Renewables have non-volatile marginal cost of zero,' she said. Also, there are now $6tn of assets which have 'pledged to divest from fossil fuels,' a huge increase over recent years.

Some insurance companies are pulling away from fossil fuel, she said.

The coal industry 'has reached its full run of social license, no more tolerance. I would argue oil and gas follow them [with] social license and financial license issues.'

The arguments that oil and gas people make against the move to renewables, such as that it will have a big impact on society, could be categorised as 'defensive arguments,' she said.

'There is an unavoidable transition of the business model. I would argue this is the moment to 'strategically transition'.

'The shelf life of oil is definitely not more than 30 years. By 2050 we will have net zero emissions. Or the survival of humanity is not in question, it is condemned.'

There should also be a dramatic increase in carbon capture and storage. 'In a net zero world, it is not oil and gas [which is the problem], it is emission, so that is what has to be looked at,' she said. It offers a 'huge possibility for business continuity.'

The oil and gas industry does have capacity to contribute to the climate problem. 'This industry is the single most privileged treasure trove of skill and experience to contribute to the world,' she said.

If the oil and gas industry wants to maintain its license to operate, it 'must stop lobbying against climate change regulation. Or you will totally lose whatever license to operate you have,' she said.

Aker BP

Karl Johnny Hersvik, CEO, Aker BP, describes his company as a 'tech company that just happens to produce oil'.

'We want the same mindset that modern tech companies do,' he said.

The company started in 2014, and so grew over a period when the oil price was plummeting.

It had to think hard about what the winning strategy would be, and decided it came down to maximising utilisation of its resources and minimising time. 'You have to be allergic to waste in any form,' he said.

Also, 'we work as hard on reducing CO2 footprint as on reducing our cost.'

Mr Hersvik is proud of a story of a company employee who was running to be elected as a local politician. An opponent from a green party asked him what he had done to reduce CO2 emissions, and he was able to say, he electrified the first jack-up rig on the Norwegian Continental Shelf. Then he could turn to ask his green opponent what he had done to reduce CO2 emissions.

Mr Hersvik sees that managing costs and sustainability go together. 'You cannot do one without the other.'

The company has a mission to 're-engineer the entire value chain - share knowledge, competency, targets, goals,' he said. 'We've been following a lean improvement journey. It is not easy to do.'

'The business models need to be flexible. Easy to say and very hard to do.'

AkerBP created the operational data management company Cognite, which now 'may be the fastest growing IOT platform,' he said. It is building ground in all areas of asset heavy industry, not just oil and gas.

Oil and gas problems are more complex than other sectors. If someone has managed to optimise an oil and gas compressor, going on to optimise a wind turbine or solar plant 'feels like a breeze'.

Aker BP developed an onshore control room for its offshore operations, which has led to both better uptime and better safety, he said.

It is pushing for dual drilling operations, when a rig drills two wells at once. 'I was amazed this hasn't been done before,' he said.

It is trialling robotic tools on FPSOs which can inspect paint, remove paint, do high pressure washing and sandblasting, and apply new paint.

The industry should be sharing more of its data. It only uses 3-5 per cent of the data, so could at least share the 95 to 97 per cent of data it does not use, he said.

'We need to think like a tech company,' he said. For example, a tech company person might ask why they can't access seismic data while drilling exploration wells, all on a smart phone.

On the carbon side, Aker BP has to pay carbon costs for emissions from its own operations, so gets a direct reduction from reducing these.

But it can work out more financially efficient to reduce CO2 emissions from other parts of the value chain, including CO2 emitted by oil consumers, the so-called 'scope 3', he said.

'There's a lot of capital out there which would be better spent on scope 3. Scope 1 is pretty optimised.'

TechnipFMC

One way the oil and gas industry can reduce carbon footprint is by using less steel, said Arnaud Pieton, President Subsea, TechnipFMC. The company claims that its 'Version 2' subsea tree has half the carbon footprint of its 'Version 1', achieved by using less steel in its manufacture. This leads to add-on benefits such as from being easier to transport and requiring smaller cranes.

TechnipFMC is trying to push customers to adopt more standard designs, but it is proving a struggle, he said. But standard designs should make it easier to reduce waste.

So far, customers have proven reluctant to pay more for a product which is less carbon intensive, he said.

In one project, the customer, an oil major, asked for the project to be 'accelerated', which would mean ships going faster and using more fuel. The oil company agreed to plant 100,000 trees in Africa to compensate for the extra carbon costs.

Shell

Wael Sawan, Upstream Director, Shell, said he sees the oil and gas industry making a 'transition' to much more collaborative working happening in the oil and gas industry.

This has happened over the past 5 years, as a by product of the industry's focus on removing waste. It found collaborative relationships could achieve much more efficiency than adversarial ones.

The industry needs to ensure it continues to make an attractive case to investors. Partly this is about technology, including using data to be able to intervene at the right time and extend the life of reservoirs, he said.

Shell is making big investments in the North Sea, but the investment comes with 'strings attached' - ensuring that the region is an attractive and safe place to grow, he said.



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