A week after COP26 came to an end, the global energy industry is now turning its focus to Abu Dhabi’s annual international oil and gas conference ADIPEC2021. A range of international oil companies, national oil companies, and oilfield service companies are convening to discuss not only the impact of the COP26 agreements but also the other challenges facing the industry.
The conference, considered one of the most important events of the year for the sector, will have to deal with a wave of criticism and negative attention from the media, Western governments, and activist shareholders. At the same time, the call for realism and transparency regarding the energy transition and climate change actions is growing. During the opening speech of ADIPEC2021, ADNOC’s CEO Sultan Al Jaber frankly addressed critical points that will be on the table over the next decade. Al Jaber highlighted the issues faced by the industry in his opening statement: “we meet at a historic moment. The global community has just concluded COP26… and, on balance, it was a success. Yet, current energy dynamics have revealed a basic dilemma. While the world has agreed to accelerate the energy transition… it is still heavily reliant on oil and gas“.
According to the ADNOC CEO, the demand for oil and gas has been very strong worldwide, outpacing current supply and leading to an energy crunch in mainstream consumer regions such as the EU, China, and even the US. One of the main reasons for this lack of balance in oil markets is a decade of underinvestment, leading to supply issues. Dr. Sultan Al Jaber reiterated that the oil and gas industry needs to invest around $600 billion per year until 2030 to increase overall oil and gas supplies. This claim directly contradicts what both international media and Western governments seem to be reporting. As Al Jaber emphasized, “even though renewable energy is the fastest-growing segment of the energy mix, oil and gas are still by far the largest, and will continue to be for decades to come”.
Related: Could An Energy Crunch Lead To A Worldwide Financial Crisis?
The ADNOC CEO highlighted that the current energy transition strategy appears to involve removing part of the modern energy system without having built anything to replace it. Al Jaber’s emphasized that “if we are to successfully transition to the energy system of tomorrow, we cannot simply unplug from the energy system of today”. The UAE Minister of Energy Al Mazrouei and OPEC Secretary General Barkindo both repeated this sentiment. While these parties all claim to be committed to addressing climate change and embracing an energy transition, they are calling for a degree of realism. Oil and gas cannot simply be excluded from the energy transition, but should instead be incorporated and included in all future planning. As the UAE Minister of Energy Al Mazrouei clearly stated during another discussion at ADIPEC, there needs to be a clear call for transparency when it comes to Western energy transition policies, as global energy demand is undeniably growing.
All possible energy solutions must be considered when it comes to covering the energy demand of the world through to 2050. As OPEC leader Barkindo reiterated during several meetings, the world will need hydrocarbon supplies to meet not only current demand but also to counter increased calls from emerging economies in Africa, India, and elsewhere. With a population growth of more than 2 billion people in the coming decades, there is pressure to increase all energy options in the mix. Oil and gas are clearly needed to support the economic growth and energy demand of the world in the coming decades.
OPEC and its members are clearly fed up with the rhetoric and idealism of certain international governments and institutions. While they claim to be committed to the energy transition, they recognize that it will be a long-term and difficult process.
ADNOC’s CEO Al Jaber believes that the company’s plan to increase production to 5 million bpd by 2030 is not going to threaten the overall emissions targets set by the UAE. Over the last few years, ADNOC has stepped up investments in carbon capture and storage, increasing its capacity from 800 thousand tons of CO2 per year to 5 million. At the same time, ADNOC has recently announced that from January, up to 100 percent of its grid power will come from clean sources - notably nuclear and solar. These developments will significantly reduce ADNOC’s operational emissions. The introduction of renewables and nuclear power generation for the whole company is a major step towards the UAE’s Net-Zero by 2050 strategy. Others will soon follow, as can be seen by the aggressive renewable strategies of Saudi Arabia and Aramco.
The main message for existing oil and gas producers to the world is clear. If the energy transition needs to become a success story, it will need to be a transition, which will take time. Without cooperation and understanding between producers, consumers, and governments, the transition will be far more difficult. During ADIPEC, the main message seems to be about the need to increase cooperation and transparency, while admitting to consumers that oil and gas are going to be the main part of the energy mix for a very long time. OPEC Barkindo stated that the growth of demand for crude oil will slow down, but still reach 108,4 million bpd in 2045.
At the same time, the energy transition is becoming a battlefield for emerging countries in Africa. Strong requests have been made by African energy leaders not to end the financing of hydrocarbon-based operations and future projects that serve as the backbone on which emerging markets in Africa need to build their future. During one of the strategic conference sessions, Equatorial Guinea’s Minister of Mines Gabriel Mbaga Obiang Lima made a strong case for the hydrocarbon future of his country and Africa as a whole. The African energy leaders clearly stated that, without hydrocarbon revenues, the future of many African countries will be bleak. He reiterated that if Western countries and international organizations want to improve Africa’s future economic growth, access to energy, water, food, and markets for their natural resources will be needed. If no financial and operational support is given, Africa will fall behind while more developed countries will reap the fruits of change.
The call for both cooperation and realism from ADIPEC2021 is one that should not be ignored. As Al Jaber and others have made clear, it will not be possible to successfully implement a global energy transition while excluding hydrocarbons and constraining investments. A clean and possibly even emissions-free future is possible, but it will take fossil fuels to get there.
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By Cyril Widdershoven for Oilprice.com
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ICYMI
There could neither be a global economy nor a modern civilization as the one we know and enjoy without oil. How could the world feed a growing population projected to rise from 7.9 billion today to 9.7 billion by 2050 and a global economy projected to grow in size from $91 trillion in 2021 to $245 trillion also by 2050 without oil.
Environmentalists who call for an abrupt end to fossil fuels and a sudden adoption of renewable energy fail to recognize the obvious lack of logic in this. On their own, renewables aren’t capable of satisfying global demand for electricity and energy because of their intermittent nature.
While the process of energy transition will continue to move forward, a full global energy transition is an illusion. Moreover, even a partial energy transition will never succeed without huge contributions of natural gas and nuclear energy.
The notion of net-zero emissions is a myth. It will never be achieved in 2050 or 2100 or ever. Therefore, the best way to combat climate change is for the global oil industry to focus on reducing carbon emissions from fossil fuels and not their actual use by deploying the most advanced carbon-catching technologies.
There could neither be a post-oil era nor a peak oil demand either throughout the 21st century and probably far beyond. It is very doubtful that an alternative as versatile and practicable as oil, particularly in transport, could totally replace oil in the next 100 years and beyond.
It is possible that one hidden reason behind the calls for global energy transition and keeping oil underground is intended to prevent the Arab world and Russia from enhancing their geopolitical and economic influence over the global economy in coming years with the continued use of oil.
Therefore, humanity has two choices. One is to accept at face value climate alarmism and the misleading information about the imminent existential threat of climate change that the environmental activists have been propagating over the past three decades, threats that may or may not happen and the other is ditching fossil fuels and see the global economy collapse If the world wants to deal with global energy transition in a rational way, the first step is to accept unconditionally that oil and gas will continue to drive the global economy throughout the 21st century and probably far beyond underpinned by both rising world population and growing global economy.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
I think that no matter what course we choose to take with energy, we are facing higher cost. It will be a distinct challenge to continue to energize large houses and drive to so many places on a whim. Few will want to change how we live, so "conservation" is currently pretty much a non-starter.
Clean energy shows a lot of promise, but is it scalable in time?
Fossil fuel still commands most energy demand, but is fossil energy becoming "tough" in the sense that most elephant-field supply and naturally concentrated resource is now rare. We go to extraordinary technological and geopolitical lengths to extract and deliver a barrel of fossil fuel. And, it probably will not get easier. Shale oil is only now profitable because the price of crude has shot up so much.
As we face higher energy cost of all kinds, we will need to ask ourselves, what is the right thing to do, all things considered. I believe that the world will slowly decide that less dependence on BURNING fossil fuel is what is required.