The Oil and Gas Industry Can and Should Play a Role in Energy Transition
The issue of energy has come to play a central role in governance in recent years. Energy efficiency — costs — and various types of emissions affect every type of industry, from agriculture to aviation to the automotive. Challenged by the tensions between all the environmental, social and governance standards, and the economic needs of production in various areas, energy is increasingly seen as one of the lead engines of economic success.
Moreover, the impact of the war in Ukraine on food security, inflation rates and the global economy has highlighted the role of energy as a national and international security issue. A recent conference on energy transition hosted by the American Bar Association underscored that diversity of options is key to addressing the environmental impact, economic concerns and security implications of the role energy is playing in today’s societies. The conference determined there is no panacea for energy and environmental concerns, nor a single perfect energy modality that will satisfy every stakeholder in the energy transition process.
All forms of energy have their pros and cons. Energy diversity with a balance of options tailored to the needs of each actor and with a complex regulatory framework is the optimal solution. Europe’s current energy security crisis has demonstrated the folly of dependence on any single form of energy. Debating balanced options and streamlined best practices would be preferable to the sort of consensus that has contributed to the ongoing energy crisis.
A debate means a seat at the table for diverse opinions and experiences. The oil and gas industry can play an essential role in eliminating the groupthink of unrealistic expectations and one-size-fits-all solutions. There are many reasons to include oil and gas in the conversation. First, gas is already seen as a transitional form of energy. Recent research suggests the methane emissions that arise from natural gas dissipate after approximately 12 years, limiting the risks to the ozone layer. Second, oil and gas are essential to the production of electricity, which means that to create renewable-based technology such as electric vehicles, there is no getting away from fossil fuels. Third, currently no other form of energy, either by itself or in combination with other renewables, is sufficient for any industry.
The global crises have exacerbated shortages of materials required for renewable-based production. The results of the war in Ukraine have underscored that the leaders in energy independence will be dependent on oil and gas for the foreseeable future. Al Gore’s comments at the recent Davos summit may have been impassioned and heartfelt, but they were scientifically inaccurate and economically impracticable. The oil and gas industry has the know-how to manage the transition process because it has the practical experience, mandate and tools to improve all the processes where oil and gas play a role. For that reason, recent attacks on the role of oil companies at COP-related events, and on the head of the COP28, Sultan Ahmed Al Jaber, the CEO of ADNOC, former head of Masdar, and the United Arab Emirates’ industry and technology minister, are misplaced. Far from being conflicted on energy and environmental issues, Al Jaber has the perfect background to play a major role in the global energy transition. His involvement in 19 diverse energy-related businesses has provided him with an array of exposure to exploration, production, storage, refining, trading and petrochemical product development. Oil and gas will remain a significant part of the global economy for the foreseeable future, therefore there is no better way to manage their role than with the involvement of experts in the field who will make the necessary adjustments to make these fuels as clean, efficient and as compatible with emerging technologies as possible.
His involvement also introduces an invaluable opportunity to take the discussion of energy transition outside the Western world and to create a constructive, collaborative approach necessary to the success of the environmental, economic and security agendas of international stakeholders. This strategy is already favored by the UAE, which has led energy and environmental initiatives and discussions in the region, from its interest in assisting the global south with countering the impact of environmental challenges to the hosting of assorted energy summits in Abu Dhabi. Only when all the moving parts of the energy transition equation are working together can we hope to optimize solutions that will be resilient enough to withstand unexpected global challenges and flexible enough to accommodate the diverse and evolving needs of all the international stakeholders.
Irina Tsukerman is a business and geopolitical analyst, president of Scarab Rising, Inc., member of the American Bar Association’s Energy and Environment Section, programs vice chair of the ABA’s Oil and Gas Committee, and has commented extensively for a variety of industry publications on energy-related issues. You can reach her by email or via LinkedIn.