Oil and Gas Companies Contribution to Long Term Global Trends

For the whole of 2020, the oil and gas industry experienced two major challenges, the oil downturn and the COVID-19 pandemic which started during the first quarter of the year. Although this industry is used to various price cycles and highs and lows of the economy this one has proven to be like no other one ever experienced.

Even though these challenges have contributed to the "greater compression" of the oil and gas industry, the remaining companies may be forced to move away from traditional methods of oil and gas production as we kick start a new decade in 2021, for the long term survival of the industry.

In the current world, the two major long-term global trends that have had a major impact on the oil and gas industry include the digital transformation and the global energy transition. The recent challenges facing the oil and gas industry such as the COVID-19 pandemic the oil downturn have only accelerated, not paused these trends. This is a wake-up call to this industry that requires a major shift in the way that it operates currently.

Digitization and the transformation of the energy sector from fossil-based to zero-carbon emitting fuels is in line with the vision of attaining sustainable life for everyone by the second half of this century. In this regard, the oil and gas industry has been under pressure for a long time for being part of the problem and not the solution towards this humanitarian vision of a sustainable future for all.

Part of the Problem

From its early days in the 20th century until now petroleum has grown to be one of the essential and the most sort after natural resources in the world. To meet the demand of the growing population, consumerism, and creativity, the supply of crude oil has grown in leaps and bounds over the last 150 years.

On the other hand, among all human activities, petroleum extraction is considered the largest contributor to the current buildup of carbon compounds in the earth's biosphere. In addition, the extraction, transportation, and refining of crude oil contribute generously to the accumulation of CO2 and other greenhouse gases.

Other oil and gas industry products and by-products also contribute to the generation of different types of toxic and non-toxic waste. The emission and buildup of greenhouse gases and carbon compounds have accelerated in the last 30 years and the oil and gas industry is seen as a major part of this problem.

However, on the contrary, I feel like the oil and gas companies have a big role to play as being part of the solution to this issue. This can be done through various actions that would ensure all the operations carried out in the industry contributes to the long-term global trends as follows;

The Energy Transition

The energy transition is a low carbon transition that is both driving and being driven by various aspects of the industry. This includes the demand side of oil and gas, financial markets, policies, and policymakers as well as various social pressures.

Amid this transition that has been further fueled by the COVID-19 pandemic and the oil downturn, the oil and gas industry is adapting to change from the traditional mode of operation and carrying out business.

However, there are various paths towards decarbonization and they vary widely depending on their speed and direction. Therefore, individual companies in the oil and gas industry can choose to make strategic adjustments to the low carbon transition from an organizations' perspective.

These organizational-based responses are affected by factors such as the location of oil and gas resources, value chain, and asset mix between oil and gas resources as well as the location of production.

Other easily overlooked but essential factors include access to long-term patient capital, quality of government policy on the low carbon transition in key markets, activism within the shareholder base, investor relations and communications, and the ability to deploy financial and human capital on R&D.

Therefore, according to the Atlantic Council, these strategies may include but not limited to;

• Coal-to-gas fuel-switching and supporting electrification
• Decarbonization of oil and gas by introducing processes like; Methane Emissions Efficiency, Zero-Emissions Production, Carbon Capture Technology, Switch to Hydrogen
• Geographic hedges to stranded asset risk
• Renewable energy investment and diversification
• Embedding climate-based ESG principles into business models, and improving messaging, etc.

Digitization

Digitization has been the backbone of the ongoing fourth industrial revolution. For very clear reasons, the COVID-19 pandemic has accelerated the push for full digitization of every process and human activity for a sustainable future.

The oil and gas industry and especially individual companies should develop and incorporate various digitized processes and systems in the production, refining, and transportation of petroleum.

According to Deloitte, digitalization is expected to play a key role in effective energy transition strategies in 2021. Apart from enabling remote operations and driving human-machine collaboration, digitalization has an important role to play in setting near-term emissions targets, using standardized and credible reporting, and tracking accountability across the hierarchy.

So yeah! to be counted as part of the solution and not the problem and hindrance to the vision of a sustainable future, oil and gas companies in Kenya and throughout the world need to incorporate strategies that support the energy transition.

This can begin by simply digitizing all the systems and processes carried out by individual companies

By Ocharo K. Duncan