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”.
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.
By Cyril Widdershoven for Oilprice.com
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