ENERGY MATTERS © VOL. 23
an opinion editorial written exclusively for ANZMEX
8 September 2020
By Chris Sladen
Energy matters – Food for thought
Ready to face a dinner party or barbecue? With lockdowns, shielding and a general reluctance to eat out for many months, like me, you are probably contemplating a nervous return to the dinner party circuit or the pitfalls of an autumn evening barbecue with your boss and their team. Deprived of interaction in recent months perhaps it could be socially awkward.
If you have been binge watching Netflix, Amazon Prime or boxed sets of DVDs, perhaps you are worried you will not be up to speed on the energy scene? Or nervous you cannot hold your own? There is nothing worse than making a stupid comment or getting caught out by some point-scoring energy know-it-all. Or having to navigate your way out of a discussion about some new energy technology which you don’t quite understand. With so much happening across the energy sector in the last 6 months, here are some top tips and facts to see you safely through the evening:
Oil sector. The oil industry is coming back fast and hard aided by oil prices steadying in the US$ 40-50/barrel range. A date worth trotting out at the right moment is April 20 when oil prices crashed into never-seen-before negative territory.
Demand is picking up – many manufacturing industries restarting output, people venturing out, kids back in school and traffic queues building up again. (Talking about local traffic and how many times you filled up – or plugged in – your car during lockdown is always a good space filler if you are lost for meaningful energy conversation because you can link it to gasoline demand).
Economies still have a lot of upheaval to come and business-related air travel and long-haul flights are still very limited but economic activity is definitely on an upswing. There is plenty of supply to keep prices low. But the key issue for prices remains the pace of economic recovery and can energy companies survive this period of reduced demand and low prices. The current phase of industry consolidation, plant closures, shut-ins, write-downs, bankruptcies and job losses is not yet over.
Exploration hotspots. Suriname is shaping up to be the next big oil province. Here Apache has struck with its third discovery offshore at the Kwaskwasi well. But make sure you know your geography! Suriname is adjacent and east of Guyana on the NE Atlantic coast of South America; the capital of Suriname is Paramaribo; nickname Par’bo. The official language is Dutch, and at less than 1 million people and ~165,000 km2, it is the smallest sovereign state in South America.
Another hotspot worth dropping into the conversation is South Africa where Total are seeking to prove up a major new hydrocarbon province offshore with a multi-well exploration campaign underway. Success could transform the energy politics of the region. Also, Total plan to drill off Angola during 4Q in a water depth of 3,628 metres, notable as an industry new world record.
Hydrogen. This is the latest and biggest energy fad. To impress your friends, it essential to know the different ‘colours’ of hydrogen. Green, Blue etc.
Green hydrogen, the cleanest of all is obtained by electrolysis using renewable electricity, in particular from wind or solar power, and so has no carbon emissions. Green hydrogen could be competitive by 2035.
Blue hydrogen can be produced by a process of steam methane reforming using natural gas with carbon capture, utilisation and storage (CCUS). Grey hydrogen is produced the same way but without CCUS so produces a lot of CO2.
There is also brown hydrogen and white hydrogen but you won’t need to know these two to get you through the evening. However, don’t get caught out by the trick question: What is the real colour of hydrogen? Hydrogen as a liquid is colour-less and non-corrosive. Its vapor is colour-less, odourless, tasteless, and of course highly flammable.
Natural gas. Both natural gas and liquefied natural gas (LNG) remains the bridging fuel of the energy transition and the go-to fuel for reliable power generation. The biggest surprise of lockdown was big oil and gas companies jumping to become integrated energy providers and face the energy transition head-on. It is the greatest strategy change in decades. Many intend to drop their lower quality oil projects, and increase attention onto high quality big gas projects and LNG. They now see blue hydrogen made from natural gas as essential to achieve net zero emissions by 2050.
Expect to see oil and gas companies also quitting environmentally sensitive areas and seeking a lower environmental footprint. A number of countries are now looking to tailor future E&P bid rounds towards lower carbon, meaning more gas-prone opportunities.
Wind & solar. Offshore wind is now a big big deal. This is perfect for oil & gas companies that can transfer their offshore expertise. Total, Equinor, Repsol and ENI have each been getting into big wind projects in recent months. It’s not only about oil companies getting in on the act, but also the oil services companies too, Aker, Wood and Odfjell for example, all hastening the energy transition.
For the first time ever, solar and wind now make up the majority of the world’s new added power generation – marking a fundamental shift in how nations get electricity. Solar is now offering some of the lowest commercial electricity prices ever.
Health and safety. The poor track record with managing hydrocarbons continues. A major oil and fuel spill occurred when a ship, the MV Wakashio, crashed and broke up on the coral reefs of Mauritius. A gigantic diesel spill from fuel storage tanks at Norilsk severely affected rivers and is believed to be the second-largest oil spill in modern Russian history.
Toxic releases occurred during a fire at Carson refinery on the US West Coast, and a fire and chemicals leak including chlorine occurred at a Lake Charles Louisiana facility. Dozens were killed when a leaking gas pipeline erupted into fire near a mosque in Dhaka, Bangladesh. Blowouts and well control incidents continued to plague the upstream industry, notably the gigantic fire at the Baghjan oilfield in Assam, India.
US elections. Trump or Biden? Whatever you say could upset someone at the dinner, worse still your boss might be at the barbecue, and your whole career could be on the line if you say the wrong thing. Best to bluff your way out and say that you have been working so hard during lockdown that you are not up to speed on the election. But do remember that whoever wins this election, it will likely be a turning point for energy in the US.
At this stage, even if you have had a few too many drinks, don’t forget that the election is on Tuesday, 3rd November.
About the author:
Chris Sladen runs an advisory service offering insights to inform, shape a decision, policy & regulation, and guide the next steps for energy ventures, acquisitions & divestments, energy transition and climate strategies. Chris has a unique global experience having worked in over 40 countries. This is underpinned by extensive knowledge of petroleum systems and where best to find oil and gas, notably in the Gulf of Mexico & nearby areas, Europe and NE & SE Asia, as well as the development of midstream, downstream & renewables investments in many emerging economies. Chris has extensive experience acquired on the Boards of companies, subsidiaries, business chambers & organisations. Chris has a career of over 40 years in the energy sector, living in Mexico (2001-2018), Russia, Vietnam, Mongolia, China & UK. His contributions to the energy and education sectors have been recognised by the UK Government with both an MBE and CBE, and also the Aztec Eagle from the Mexican Government – the first foreigner in the energy sector to achieve this award. Chris has published extensively over five decades. Chris’ articles for Energy Matters reflect his experience and enthusiasm and are not paid for in any way.
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ANZMEX ORG A.C. is a politically neutral business council with no political affiliation. The views expressed in this column are not necessarily representative of the official views of ANZMEX or any of its officers or staff.