The Last Barrel: Path to net zero

It appears that the Biden administration has finally realized that successfully achieving the energy transition is a monumental challenge that will take the collective brainpower and cooperation of industry and the world’s political leaders. Since the launch of the ET initiative, the actual cost and technological complexities of achieving net-zero are better defined. 

Although Mr. Biden assumed his energy policy would force U.S. producers to capitulate and embrace green energy (like flipping a light switch), the actual transformation process and the role that hydrocarbons play in driving our economy were more than Joe’s brain could comprehend. Fortunately, energy producers and OFS companies are providing valuable leadership and are defining how ET will be implemented, along with realistic cost and timeframe estimates. 

ADNOC’s plan produces win-win. UAE President His Highness Sheikh Mohamed bin Zayed Al Nahyan used the annual ADNOC Board of Directors meeting to outline the UAE’s Net Zero by 2050 strategic initiative. The plan will establish a new low-carbon solutions and international growth vertical, focused on new energies, gas, LNG and chemicals. During his presentation, bin Zayed said that ADNOC has taken steps to further reduce its carbon footprint while expanding operations to meet rising global energy demand. ADNOC’s comprehensive, multiple-pronged approach is testament to the UAE’s commitment to remaining a responsible global energy provider while enabling a more sustainable future. 

H.H. Sheikh bin Zayed emphasized ADNOC’s role as a primary catalyst for the UAE’s growth and diversification, and recognized the company for maximizing value for the nation and creating new economic and industrial opportunities for the private sector. A key component of ADNOC’s effort is to drive industrial growth through its In-Country Value (ICV) program and support its “Make it in the Emirates” initiative. This year, ADNOC’s ICV program has driven $9.54 billion back into the nation’s economy and created employment for 2,000 UAE nationals in ADNOC’s supply chain. These achievements have infused $38 billion into the economy since the program was launched in 2018. In addition, a total of 5,000 UAE nationals have been employed in ADNOC’s supply chain since the initiative was launched. 

The “Make it in the Emirates” initiative has signed agreements for local manufacturing opportunities worth $6.8 billion with UAE and international companies this year. The program is on target to locally manufacture 100 products in its procurement pipeline, worth $19 billion by 2030. At the meeting, the board also endorsed ADNOC’s plan to increase oil output by 5 MMbopd by 2027, from the previous target of 2030, as part of the accelerated growth strategy. ADNOC’s five-year business plan and capex of $150 billion for 2023-2027 was approved to enable the accelerated growth strategy. As part of this plan, ADNOC aims to drive $48 billion back into the UAE economy through its ICV program. 

Reducing GHG. ADNOC’s net zero by 2050 ambition covers its operational Scope 1 and Scope 2 greenhouse gas emissions. The strategy is underpinned by a continued focus on key decarbonization levers of energy efficiency and operational excellence across the value chain, large scale implementation of CCUS and the use of renewable energy sources. 

Talos CCS plan. Talos Energy founder, President and CEO Tim Duncan is working on a CCS initiative in the GOM. “We are oil and gas guys with a significant amount of geological/geophysical capabilities, but we can also do carbon capture and sequestration” Duncan explained. There has been a significant amount of discussion about what to do with free cash flow. The focus on ESG and safety leadership led Talos to launch an aggressive CCS initiative. “We expect CCUS technology will take 6-15 years to develop, but to reach net-zero CCS must be part of the solution,” Duncan continued. Talos has taken a leadership role in the developing market for global emissions reductions, but additional CCS capacity is required to meet global emissions reductions and climate objectives. 

CCS value chain proposition. Duncan outlined Talos’ CCS strategy that involves capturing, transporting, injecting and permanently storing CO2 emission from industrial sources back into the ground in saline aquifers: 

• Capture – CO2 emissions removal uses proven gathering, processing, compression technology. 

• Transport – CO2 safely piped through midstream assets (potential to use existing pipelines). 
• Sequester – CO2 safely stored underground in EPA Class VI injection wells (disposal type wells).  

Complementary skill sets. Duncan then outlined how the company is applying its overlapping geological expertise and business development skills to build a large-scale decarbonization solutions company. The items below are core engineering E&P competencies the company possesses, which are applicable to building-out Talos’ aggressive CCS initiative: 

• Conventional reservoir expertise and G&G team 
• Significant Gulf Coast / GOM presence 

• Vast seismic database 
• Established operator and project management capabilities 
• Strong HSE track record 
• Business development and commercially driven. 

Two CCS project types. “The U.S. Gulf Coast is a world-class market opportunity for CO2 capture,” Duncan stated. The area contains the ingredients for a new business, because it’s rife with big industrial emitters, who are financially motivated to capture, transport and store CO2. They require a dedicated technology partner with the geological expertise and practical business plan to accomplish their goals. Duncan then drilled down deeper into Talos CCS strategy, revealing the two types of projects underway on the U.S. Gulf Coast (Texas and Louisiana) that include regional hubs (clustered industrial base) and point source (single facility / plant). 

Exceptional value creation. Duncan concluded by outlining his vision to combine the company’s upstream and carbon capture segments, to create a unique and specialized complementary economic framework. The CCS and upstream businesses will form the foundation for a successful energy company in the future. The upstream segment will execute high-return projects drawn from an ample inventory of high-quality geological prospects. The developing carbon capture segment will offer stable long-term projects that will deliver steady cash flow. These complementary business models will optimize value for the enterprise providing growth optionality, risk allocation and unique investment opportunities relative to publicly traded U.S. E&Ps. 

SLB defines challenge, launches new business ecosystem. As the gap between net zero ambitions and actual cumulative CO2 emissions grows, more scenarios are pivoting toward carbon capture, utilization, and sequestration (CCUS). But it doesn’t come without significant challenges. According to SLB, “there is no path to net zero without CCUS.” It is essential to reach net-zero greenhouse gas emissions. It’s one of the few decarbonization mechanisms that’s technically viable using current technology; the challenge lies in feasibility. High costs, operational risks and complexities navigating the value chain often stall CCUS project development. To help solve the problems, SLB has launched an innovative market ecosystem and partnered with like-mined companies to help overcome the challenges. 

Industry collaboration. To develop CCUS, SLB has entered into a strategic collaboration to accelerate decarbonization solutions across industrial and energy sectors. The new venture will combine decades of experience in CO2 capture and sequestration, innovative technology portfolios and execution expertise in addition to engineering, procurement and construction capabilities. The collaboration will focus on hydrogen and ammonia production, where CO2 is a by-product and in natural gas processing. CCUS abates the emissions from these energy-intensive industries, creating new low-carbon energy sources and products. “CCUS is vital in creating the decarbonized energy systems our planet needs to balance energy demand with climate objectives, said Olivier Le Peuch, SLB CEO. We are excited about this collaboration with Linde to develop CCUS projects and support the growth of low-carbon energy products from conventional energy sources.” 

Reality check. However, CCUS technologies are being adopted too slowly to achieve the IPCC’s 2.0° upper limit for global warming (McKinsey). The new study suggests that scaling the CCUS industry has the potential to achieve net-zero emissions and can decarbonize 45% of remaining emissions from carbon-intensive industries. But CCUS adoption needs to grow 120 times by 2050 for the world to meet its existing net-zero commitments, at a cost of $130 billion per year—more than governments are willing or able to afford alone. 

The industry needs to reduce the cost of CCUS through small-scale pilots, while collaborating to form cross-sector clusters to share large infrastructure like pipeline networks. Meanwhile, governments need to define the role of CCUS in their industrial strategies and create the regulatory, tax and reporting frameworks that will allow the industry to scale, while still using subsidies for early projects to stimulate future growth. 

“CCUS is critical to delivering the world’s net-zero commitments and will need to play a material role in low-carbon hydrogen and decarbonizing tens of thousands of carbon-intensive industrial facilities worldwide, said McKinsey Partner Luciano Di Fiori. “Close collaboration between the public and private sectors will be needed to scale and mobilize the industry.” 

While governments need to create the right tax and legislative frameworks to incentivize and de-risk private investment in CCUS, the industry, itself, must develop innovative new business models and new sources of revenue, rather than relying on limited state subsidies. CCUS has the potential to decarbonize a significant share of the 25,000 carbon-emitting industrial facilities worldwide, but this will require major capital investment across many projects on a global scale, Di Fiori concluded. 

World-class R&D scientists and engineers. Our industry has been defined by overcoming seemingly insurmountable engineering and operational challenges. Remember the issues of drilling multiple offshore wells from a single platform. No problem. Use advanced PDM/RSS and M/LWD to efficiently steer the wellbore to the reservoir. Water too deep. No problem. Use floating drillships with GPS navigation and positioning systems. Oh no, we are running out of oil. We need more sand, less shale. No problem. Launch the shale revolution utilizing miraculous extended-reach horizontal drilling and high-tech staged fracing techniques. Need energy independence? No problem. U.S. oil output hit an all-time high of 12.24 MMbopd in May 2019 and started exporting crude. 

Need to achieve net zero? Big problem. But as demonstrated by an unprecedented list of remarkable technological achievements and recent initiatives, it’s clear our industry is not the problem. On the contrary, we are integral to the solution. WO 

About the Authors

Craig Fleming

World Oil

Craig Fleming Craig.Fleming@WorldOil.com