Home / Oil & Energy / Oil & Companies News / Resilient energy demand may delay shift from fossil fuels

Resilient energy demand may delay shift from fossil fuels

Resilient demand for fossil fuels from emerging economies could delay the world’s transition towards renewable sources of energy.

Energy consumption for emerging markets is about a third of that for members in the Organisation for Economic Cooperation and Development (OECD), said Darren Woods, CEO of ExxonMobil. He was among the several executives who spoke at the CERAWeek by IHS Markit energy conference.

As emerging economies continue to grow and as their consumers join the middle class, their demand for energy will increase. Natural gas will play a key role in meeting that demand.

“As we go forward in the future, it is going to be needed,” Woods said.

In addition, the world will still need crude oil.

In India, gasoline demand now exceeds levels from before the coronavirus pandemic, said Shrikant Madhav Vaidya, chairman of Indian Oil Corp Ltd (IOCL).

“The country is hungry for energy,” he said. “We are an aspirational country.”

The future of oil and gas production is critical to the chemical industry because both provide companies with feedstock such as naphtha as well as ethane, propane and other natural gas liquids (NGLs).

Continued demand for fossil fuels will help ensure feedstock for the petrochemical industry. Falling demand could threaten it.

NATURAL GAS FORMS BRIDGE

For natural gas, executives expect the fuel will act as a bridge that will allow nations to limit their carbon emissions while providing them with the energy needed to grow their economies.

“Gas is going to be a big part of this solution going forward,” said Saad Sherida Al-Kaabi, CEO of Qatar Petroleum. He is also Qatar’s minister of state for energy affairs.

For India, Vaidya noted the country’s need for all sources of energy. But he singled out natural gas as being India’s path to the energy transition.

“Gas is going to be the major primary fuel in the days and years to come,” Vaidya said.

Colombian state energy producer Ecopetrol wants natural gas to play a more significant role in its portfolio, said Juan Manuel Rojas, corporate vice president, strategy and business development.

By the end of 2030, Ecopetrol wants natural gas to make up 35% of the company’s upstream portfolio, up from 20%.

Even in the near term, energy demand is rising because economies around the world are recovering from the recession caused by the pandemic.

OIL OUTLOOK

For oil, demand in the next few years should rise as a part of a larger commodities supercycle, said Jeff Currie, an economist who is the global head of commodities research in the global investment research division of Goldman Sachs.

China’s economy has already recovered the ground it lost during the pandemic, and the US should reach that milestone by the end of 2021, said Ahmed Al Jaber, director general and CEO of Abu Dhabi National Oil Co (ADNOC). He is also the minister of state for the United Arab Emirates (UAE).

Global oil consumption stands at 94m-95m bbl/day and it should rise above pre-pandemic levels by the end of 2021, Al Jaber said. That compares with a low of 75m bbl/day reached in 2020.

Qatar Petroleum’s Al-Kaabi said, “We will need oil for a very long time. Oil is not going to disappear anytime soon.”

Future crude demand could increasingly come from petrochemicals, which could help offset any decline from fuel.

Indian Oil plans to shift its pattern of crude consumption towards petrochemical production, Vaidya said. It plans to convert 15% of its oil into petrochemicals in the next 5-8 years, up from the current 5-6%.

Further out, the outlook for oil demand gets cloudier.

Later in the decade, Currie said polices intended to reduce carbon dioxide (CO2) emissions will start slowing down demand growth for oil. After 2030, oil demand could start shrinking.

MAKING OIL GREEN

A lot of factors could delay that day of reckoning. Currie did not specify a date, and oil companies are working hard to make crude relevant even as governments adopt policies to lower greenhouse-gas emissions.

One way is for oil companies to rely on carbon capture and storage. The sequestered CO2 can then be re-injected into wells for enhanced oil recovery. For decades, companies have been using CO2 to increase oil production.

Occidental Petroleum plans to rely on enhanced oil recovery to help the company reduce its net carbon emissions to zero, said Vicki Hollub, CEO of Occidental Petroleum.

The company is already working with two ethanol plants in Texas to sequester their CO2 in the Permian basin in the western part of the state, she said.

Occidental also plans to capture CO2 directly from the atmosphere using a plant it is developing under its joint venture with Rusheen Capital, a private equity firm. The plant could extract up to 1m tonnes/year of CO2.

Oil and gas producers can further cut their carbon emissions by using electricity to power their equipment, said Scott Sheffield, CEO of Pioneer Natural Resources.

Hydraulic fracturing (fracking) could make up the majority of the carbon savings that could come from adopting electricity as a power source, he said.

As more electricity is produced by renewable sources, this could result in more carbon savings for oil and gas companies, Sheffield said.

Al Jaber of ADNOC said his company is also looking at ways to reduce carbon emissions from oil production. Thanks to its geology, ADNOC’s oil reserves have some of the world’s lowest carbon intensity. The company wants to reduce that carbon intensity by a further 25%.
Source: ICIS, By Al Greenwood (https://www.icis.com/explore/resources/news/2021/03/04/10613658/insight-resilient-energy-demand-may-delay-shift-from-fossil-fuels )

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping