Tackling the Energy Transition Challenge

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Even if you don’t live in Houston – the energy capital of the world – you have probably heard the terms “energy transition,” “net zero” or “fossil fuel decarbonization.” It is also likely that you've heard these buzzwords many times of late. And quite likely, you may have heard them a few times too many, perhaps enough to qualify as “greenwashing.” Typing “energy transition” into Google search brings 680 million results. This shows not only the momentum the movement carries but also the sheer pressure on companies across multiple sectors to act.

But what does the energy transition mean?

Demystifying the Energy Transition

Simply put, the energy transition is the complex process of replacing fossil fuels with low carbon energy sources. Beyond simply making the shift in the energy mix, this process also implies a very significant structural change that is happening across the entire value chain of energy supply and consumption. Basically, this means a complete transformation of the energy industry we have been working in for over two decades – including the economic and social transformation of communities across the world.

We can see this transition happening across multiple industries. McKinsey & Company outlines nine key sectors: oil and gas, power, automotive, aviation and shipping, steel, cement, mining, agriculture and food, forestry and land use.

Energy Transition in the Oil and Gas Industry

In our line of business, we help our oil and gas clients navigate the opportunities and the challenges resulting from energy transitions. Many companies we work with, across the upstream and midstream segments of the energy chain, have long ago started to pivot. And they have made significant commitment to the energy transition — and some admirable progress, too. 

These commitments are driven by shifts in technology innovation, regulatory landscapes, consumer needs and preferences, and investor sentiment. Many companies are now framing their strategic choices and shifting their portfolios around issues such as carbon capture or hydrogen, divesting from high-carbon portfolios into new segments. 

Different Aspects of the Energy Transition

Implementing a net zero scenario means a significant reduction in the use of fossil fuels. But the energy transition is not just about switching to alternative energy resources — it is also about finding better, more environmentally friendly ways to produce oil. It means commitment and innovation to reduce the impact of energy exploration and production of fossil fuels in order to minimize impact on the environment and the community. 

Net zero goals are noble and ambitious. How and when we can reach them remains to be seen. Is our net zero future going to be here in 2030? Or is it coming in 2050? What we have learned in our work is that the process of the energy transition is full of unknowns. It is not one size fits all.

Celebrating Good Work in the Oil and Gas Industry

While we strive for a more sustainable future — for the uptake of renewables and a transition to low carbon primary energy — the reality is, we will likely remain dependent on fossil fuels for a while longer. And this is the part of our work which we believe is very important: helping our oil and gas clients to communicate their outstanding efforts to reduce the impact of fossil fuel exploration. This is the part we believe gets less attention than it deserves.

Many of our clients are investing in technologies that will help to fundamentally change the landscape of oil production by reducing fugitive methane emissions, focusing on carbon capture, or increasing recovery and efficiency of oil and gas production towards decarbonization. They all do it in their own way and in their own niche.

For example, Nauticus Robotics is a Houston-area based developer of ocean robots, autonomy software and services delivered to the ocean industries. They are focused on developing the next wave of cutting edge sustainable subsea technology to advance the Blue Economy and ocean decarbonization. John Crane, one of the world’s leading providers of engineered technology with more than 5,000 employees across 200 global locations, is leading the way in customer decarbonization with its commitment to the Energy Transition in the midstream of the oil and gas industry. And Celsius Energy, a Schlumberger New Energy business venture, offers turnkey geothermal energy solutions for building, heating and cooling, cutting CO2 emissions by 90% per kWh generated and lowering energy consumption by 60%.

And these are just some examples — we cannot name them all in one blog post. Stay tuned for more.

Topics: Sustainability, Energy Transition