A full month into 2021 and we are past the point of making predictions for the year ahead, other than unpredictability and uncertainty likely to remain the case for some time yet in the energy sector.
Live news feeds, rapid changes in sentiment, new policy statements and the power of social media all make the business of opinion-forming and writing challenging.
These days, as it is easy to get carried away in any direction in the energy sector there are a few fundamentals to bear in mind.
A keen rate of change
The rate of change that is driving energy transition is difficult to keep up with and sometimes hard to understand. The foundations of this change movement can be attributed to climate change activism and enhanced news coverage, and how governments, investors and large corporations have reacted to those over the past few years, and, more recently, to Covid-19.
Some reactions have led to significant changes in UK government policy, from banning petrol and diesel cars by 2030 to ceasing sponsorship of overseas oil and gas exploration. Large corporations such as BP and Shell have changed dramatically and have led others to react in a similar, proportional fashion.
In these current times of high levels of public emotion and rapid change, it could be questioned in years to come whether our response to current challenges and issues in the global energy sector were rational, well thought-through and measured.
Are we turning our backs on oil and gas?
The importance of the oil and gas industry globally is well-known, from providing plentiful and relatively cheap sources of energy to being a major resource across multiple industries including medicine, clothing, electronics, transport, construction and many more.
Now, and for some considerable time yet, we are dependent on oil and gas although the fact that we need to be more responsible with oil and gas products and by-products such as single-use plastics and air pollution is irrefutable.
What else can the oil and gas sector do?
Led by the E&P majors, we are starting to see smaller companies changing their name, identity and purpose. Energy transition is coming into focus for E&P and oilfield services companies who are able to adapt their strategies.
Some are showing interest in hydrogen energy, wind power services and re-purposing offshore installations to become renewable energy assets. These developments are very positive and clearly help balance public opinion and investor sentiment.
Some may say that the oil and gas sector has some way to go in justifying what is an essential existence. Do we really understand the impact of the sector in producing emissions from large diesel generators, flaring and hydrocarbon leakage from plugged wells to transmission flow? Could the oil and gas sector do more in the effort to finding sustainable alternatives or green improvements to single-use plastics and combustion fuel?
In 2020 we started to see greater belief, sponsorship, funding and attention in new start technology and high tech companies leading this charge. Addressing more of these types of questions may help the very survival of the sector.
Are renewables the solution?
The benefits of clean energy from wind, solar and hydrogen are undeniably highly attractive and very enticing.
While many people would argue that being able to find solutions that are cost effective, reliable and sustainable is the ultimate prize for the energy sector, there is still a long way to go in fully and honestly justifying some of these alternative energy sources.
Does the lifecycle of a wind turbine or solar panel, from manufacture to decommissioning, justify its energy contribution while offsetting its environmental impact? Will demand meet supply or vice-versa in the emerging hydrogen sector and will it be cost effective? Answers to these and other key questions are unknown and add to the uncertainty of the energy sector.
The rapidly changing energy sector is exciting, high tech and challenging. The focus it is getting can be put to very good use and will hopefully help us all with a balanced, measured and collaborative approach to opportunities and benefits across all its various parts.
Alasdair Green is a director and head of E&P at Anderson Anderson & Brown
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