Things can rarely be seen in only black and white.
People often find themselves at extreme ends of the spectrum when it comes to complex issues and seeing the middle ground – or even recognising it exists – isn’t easy.
Take the oil and gas industry; depending on what you see and hear via social media, for example, you could well be under the impression oil and gas has had its day, with no future in the energy transition. For some, there’s the perception that oil and gas is just plain “bad” and the quicker supplies are shut off, the better.
Society’s and investors’ expectations of oil and gas companies have certainly changed in terms of Environmental, Social and Governance (ESG) criteria, and companies large and small have to be able to demonstrate the actions they’re taking to meet the ambitious targets of the Paris Accord.
Yet, the reality is that the oil and gas industry has a critical role in a carbon neutral future, particularly gas.
At the global level, studies by the likes of McKinsey estimate that, by 2050, oil and gas will still account for around 40 per cent of global power generation. It’s not about one or the other – it’s about the overall energy mix, and the role that we all have to play.
For starters, eight out of 10 UK homes use gas for heat today and while there are ongoing discussions about fuel sources to heat new-build homes after 2025, the vast majority of existing households will continue to require gas well beyond the life of existing North Sea fields.
Second, it’s acknowledged that the single greatest reduction in global fossil fuel emissions can be brought about by coal-to-gas switching for power generation.
And third, gas currently provides the only grid scale back-up for intermittent generation, making it the other part of the renewable story. So gas is very much part of the solution.
It’s also crucial that the positive economic impact the oil and gas sector has on society as a whole is not overlooked or trivialised.
Oxford Economics, a leader in economic impact analysis, looked at the difference Neptune makes to society, specifically on the European economies where we have operating assets. The results were positive and they demonstrated the extent to which E&P companies provide a tangible contribution to local populations. Whether it’s the direct employment of skilled people, generation of work for supply chains or increased spending by Neptune staff and suppliers’ staff within their respective domestic economies, the benefits are wide-ranging and widely-felt.
I think it’s fascinating that the positive impact of what we do exceeds our core function of providing energy to millions of households.
It was a point well-made in Oil & Gas UK’s recent Economic Report. It stated: “Production of domestic oil and gas directly accounts for around 1.2 per cent of the UK’s GDP and will continue to contribute billions of pounds of taxes in the future, as well as securing hundreds of thousands of skilled jobs”.
It went on to say: “This industry can play a major role in delivering the UK’s net-zero future, given the recognition by the Committee on Climate Change of the importance of oil and gas as part of a diverse energy mix in 2050 and beyond. It can help deliver secure and affordable energy in a safe manner and contribute to the low-carbon solutions that will be required to realise the UK’s ambitious climate change goals.”
Just as the McKinsey study referenced earlier, the OGUK report also pointed out global energy demand has increased by two-thirds since 1995 and this will continue in the decades ahead, even as the energy landscape changes at pace.
The report underlines that it’s vital we all work collectively to ensure we operate a safe, sustainable oil and gas industry that positively contributes to local economies AND to a net-zero future. That includes consumers who – through food and lifestyle choices – will have a significant role to play.
There is no shortage of positive examples of industry taking action to reduce GHG emissions in particular.
In the Norwegian North Sea, for example, our floating platform in the Gjøa field is the first to be operated with power from shore through a 100km long submarine cable. Electrification of the Gjøa field reduces CO2 emissions by around 200,000 tonnes a year.
In Germany, we’re reducing flaring of associated gas in oil operations by using the gas in combined heat and power units, reducing the amount of energy purchased. We finalised a baseline study for flaring and venting in December last year so that we can prioritise reduction projects.
And in The Netherlands, we implemented a programme to reduce NOx emissions to meet new emission targets which came into force at the beginning of 2019, including changing turbines on 18 platforms which resulted in a significant reduction of NOx from our activities.
Key to all of this is transparency. It’s important to talk about the positive economic impacts a company has on society, and equally important to share the steps being taken to reduce the environmental impact of oil and gas operations.
The world will continue to require more and more energy and the activities of our sector, in meeting that demand, can continue to provide enormous social and economic benefits to society.
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