Management issues: A changing organization for a changing world
People are talking a lot about supply and demand. The supply is there, but geopolitical events have disrupted supply chains. These are interesting times for global economies and energy companies, which are playing a role as caretakers of our planet and taking on responsibility for sustainability.
It is well over 12 months since the Association of International Petroleum Negotiators (AIPN) changed its name to the Association of International Energy Negotiators (AIEN), to reflect the rapid expansion of the energy industry and diversification of the mix of energy sources.
The AIEN is based on three pillars: networking, education, and model contracts. Like any member organization, we must ensure that we stay relevant and adapt to the rapidly changing markets we are experiencing today. Readily transportable, oil has been a fundamental stepping block from resources, such as whale oil, peat and coal. Today, natural gas has the supporting infrastructure needed for transportation and plays a critical part in the energy transition.
The existing energy system needs to transform, and the skill sets to do this lie with the people that built the original systems. These people, many of whom are members of the AIEN, are going to enable the energy transition, which is why our work to bring them together for workshops, classes, and regional networking events is so important, Fig. 1.
Changing from petroleum to energy has been a natural transition for the organization. The roles of our members have been changing, and they are taking on broader responsibility for energy beyond traditional oil and gas. They are already very familiar with carbon capture, hydrogen, and natural gas, putting them in an ideal position to support the energy transition.
To support the changing landscape of energy markets, we have created three task forces covering hydrogen, carbon capture, and ESG. These work to establish what is needed to assist the industry in moving forward in these areas, and to identify where there are shortfalls. The petroleum industry has been carrying out CO2 programs for decades, capturing the gas for injection into wells, and the knowledge and experience it has accrued in completing major projects are invaluable to the energy transition.
A MULTIFACETED MARKET WITH OFTEN CONFLICTING DRIVERS
We are seeing increased diversity in our membership across the mix of traditional and new energies, and with growing regional variations. The challenge of the energy transition has different elements depending on the region. Developed economies got to where they are today by using cheaper fuels, such as coal. We can’t preclude others from following the same route and reaping the benefits. The question is how to balance economic demands and the need for secure energy supplies with sustainability. However, decarbonization is a global issue and, whereas roles were previously based on specific regions and projects, we are rightly moving toward global cooperation.
At the recent International Energy Summit (IES) in Miami, one of the takeaway quotes was: “If there is no transmission, there is no transition.” With six out of eight billion people in some form of energy poverty, is critically important that we address this issue and, if we are to guarantee access to affordable, sustainable energy, we need diversification of supply.
In areas where energy poverty is a real issue, we need to balance the needs of different regions to ensure a fair transition going forward. How do we incentivize countries to adopt more sustainable technology without stopping regional development? These areas need support from the developed world and, for sure, we need to solve the issue of energy poverty before developing countries can embrace concepts, such as e-mobilization.
Energy security is fundamental to global economies, and it creates the freedom for governments to invest in the environment. We need governments to look to the future—not just short-term strategies aimed at getting them re-elected—have open discussions that tolerate all points of view, and provide apolitical education about the challenges of the energy transition and its balance with economies, and the need for energy security. This will facilitate innovation and help us find the solutions we need.
TRADITIONAL ENERGY RESOURCES WILL BE AROUND FOR MANY YEARS
While we have moved to a broader focus on energy, we have not given up on oil and gas. Although low- or zero-carbon energy sources, such as hydrogen, solar, wind and nuclear, have an important role in the new energy mix, we also see hydrocarbons, predominately natural gas, playing a big part in the energy transition, along with carbon capture and carbon offsets.
Carbon credits must be global, but are they priced the same, and where are they obtained? This is an area that will need to develop and, again, requires global cooperation.
When we look around our homes or our desks, we need to understand how much plastic sourced from hydrocarbon resources is in the things around us. Combined with the demands of different economies and the need for energy security, where necessity outweighs other priorities, it will be impossible to eliminate the need for oil and gas from the energy mix. Indeed, if we look at a 10-year timeframe, in parallel with a significant increase in the supply of renewable energy resources, we expect natural gas to maintain its position or even take an increasing role in power generation.
EVERYTHING HAS AN IMPACT
While fossil fuels have a “bad press,” they have high energy density, and we need to remember that everything has an impact. Nothing is totally “renewable,” as everything requires additional resources. Renewables are intermittent, uncontrollable and non-dispatchable. They are also not a store of energy and require lots of technology and infrastructure, including rework of the power grid to accommodate them, all of which needs to be managed and maintained.
Chemical batteries are the most common form of energy storage for renewables but what happens at end of life? What is the circularity of all materials involved in energy production? Where do critical minerals and materials come from? China dominates mineral supply chains and metals processing markets, and semiconductor production requires all 118 elements of the periodic table. Relying solely on a single country presents a huge risk to energy security, as Europe learned when Russia abruptly turned off gas supplies.
WORKING TO DELIVER THE ENERGY TRANSITION
The energy landscape is changing quickly, and there are many factors to consider. As a neutral, unbiased party, AIEN can bridge the divide between the private sector and governments, helping to build trust, understanding and cooperation. There is the risk that public opinion will push against energy companies, with a younger generation that is not always sympathetic to traditional energy resources. Governmental policies also may not consider all aspects of the energy transition. It is vital to understand the value that the energy industry offers with unequaled expertise and its experience to make the energy transition a reality.
Taskforces within AIEN are looking at how existing petroleum contract structures can be leveraged by new energy markets and projects. While known for its model contracts, AIEN sees the educational and networking pillars of its organization as being equally important for the energy transition, so we are supporting and helping our members to learn about new fields. As well as delivering the materials needed for new energy markets, a crucial part of our organization’s work is to pull people together to share their in-depth knowledge and find solutions to the challenges we face, Fig. 2.
Although there are many challenges to the energy transition, there are also many opportunities. If we look at how the energy market has developed, it is amazing how quickly we have moved in a short space of time. Companies are taking action to reduce emissions before laws and regulations are put into place. This is a fundamentally different situation from those we have experienced in the past, as the transition is not only driven by technical advancements or economic factors but by human desire. Whether you believe that the planet needs to be saved or not, people are moving together to achieve a better world—and that is amazing!
Ultimately, AIEN is driven by members and their ideas. We have lofty goals to meet, and change will not happen overnight. There is much uncertainty, and we can’t predict the future, but we can certainly learn from each other to help move us toward a better future.
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