As part of its energy transition series, the Greek Energy Forum (GEF) organised a discussion on the role and outlook of the oil and gas industry in the low carbon economy on 14 May 2019 at Cass Business School. The event followed the successful completion of previous GEF events on 'EV & Small-Scale Batteries: Outlook for Electricity Ecosystem' and 'Energy Storage and MicroGrid Applications' co-hosted with FTI Consulting.
As efforts to lower carbon footprints intensify, oil and gas majors are investing into clean energy by adding low carbon electricity assets in their portfolios and making long-term investments into new energy frontiers. But is this a sustainable and scalable business model for integrated oil and gas companies? How will the presence of these new players into the electricity space disrupt the traditional power sector ecosystem? Where are the biggest challenges? These were some of the questions being addressed.
Keynote speakers included Menelaos Ioannidis, CTO of Lightsource Labs, and Oliver Rix, Partner of Energy, Utilities & Resources of Baringa. Anastasios Papazachariou moderated the discussion.
The key highlights of the evening include:
- There are currently three mega trends taking place in the energy industry:
- growing penetration of renewables into the energy mix, along with increasing presence of storage solutions
- mass electrification from vehicles, public transport and heating
- digitalisation of the energy landscape (advances in Big Data, Internet of Things, etc.)
- Although we are in the middle of the energy transition process, there is still lots of uncertainty in terms of the pace, the magnitude and the destination of this transformation.
- Fossil fuels are projected to be the dominant source for the decades to come. However, there is an urgent need for the climate change to be addressed.
- The main question is whether electricity can be a good place for oil and gas companies? The electricity market is a very different environment compared to the competitive oil and gas sector. It is highly regulated, domestic (politicians have to get their hands dirty), and exposed to lower risks.
- The electricity market is anticipated to play a massive role, with oil and gas companies pivoting into that field.
- Starting with the acquisition of the First Utility from Shell in the UK in 2018, a significant competitive and disruptive force is expected over the coming years for traditional utility energy suppliers/retailers. Shell aspires to become the world’s biggest power company.
- A wave of other acquisitions, including battery manufacturers, electric vehicle charging start-ups, has also started taking place.
- Also, in recent years, we have seen a number of acquisitions from oil majors, although the latter have no clear view on strategy.
- Decarbonisation seems to be more a matter of developed economies, with Europe being a major contributor to that, as developing countries are faced with huge growth in energy use.
- In the recent years, the potential impact of prosumers (producers/consumers) in the development of electricity markets is considered an important driver. As things currently stand, every house in the UK with a south facing roof can install solar panels and cover 50-60% of its electricity needs.
- The Oil and Gas Climate Initiative, a voluntary CEO-led initiative by 13 oil and gas major companies, takes practical actions on climate change. The initiative, through its $1 bn investment fund, has committed in lowering the carbon footprint of the energy and industrial sectors.
- Improved economics drive change, but there are still big challenges lying ahead.
- How do you generate rates of returns equivalent with those of the oil and gas?
- Would that imply deregulation of the electricity market and less political intervention?
- How are greener alternatives expected to fill the gap of the government budgets that will be created by the loss of the oil and gas revenues?
- How is the heating system going to be electrified?