After the Pomp and Circumstance, Reality Sets In

In 2021, all eyes were on Glasgow from Oct. 31 to Nov. 12 when the United Nations hosted multilateral discussions on climate change matters at its 26th Conference of the Parties (COP26). At the heart of COP is a review of the national communications and emission inventories submitted by the Parties of the Paris Agreement. It was all pomp and circumstance leading up to the conference; representatives from city to national level government, industry, the scientific community and academia sought to accelerate the transformation of economies to green and address the impacts of climate change. 

For the oil and gas sector, it was clear that financing for traditional oil and gas projects was halted unless they included an innovative, low-carbon component. Many state-owned finance institutions made these announcements, with several countries looking to phase-out oil and gas – as well as coal – within the near future. Furthermore, private financial institutions have committed trillions of resources to finance projects with net-zero aspects through the year 2050.  However, the oil and gas industry was absent from COP26 proceedings.

Renewable energy took center stage, as the conference posited a fivefold increase in capacity was needed to reach net-zero. That said, significant announcements came from two of the highest electricity consumers. The US committed to 100 percent electricity from renewables by 2035, and India committed to 50 percent renewable electricity generation within the next 10 years. Furthermore, Race to Zero members – the UN's high-level climate champions who are spearheading non-state actors to halve global emissions by 2030 – have committed to 750GW of renewable capacity by 2030.

For the first time, nuclear also took the prominent stage, with several countries in the EU calling for the green designation of nuclear. The US announced the Nuclear Futures Package – a US$25 million commitment for project development of large-scale and small modular reactors (SMRs) in partnership with countries such as Brazil, Indonesia, Kenya, Poland, Romania, and the Ukraine to help each progress its nuclear goals.

Of course, we could not have had the pomp and circumstance without the posh energy transition technologies on stage, such as hydrogen. Forty global leaders joined the Glasgow Breakthroughs, a framework for nations to provide affordable, attractive, and accessible hydrogen to address global emissions. The leaders are also a part of The Breakthrough Agenda, which provides for the commitment of annual progress toward limiting the global average temperature increase to below 2°C.

But after the pomp and circumstance, reality is setting in as the commitments made at COP26 are by no means legally binding.

With world energy consumption expected to almost double by 2040, fossil fuels will still comprise more than three-quarters of world energy consumption. To be sure, in examining EICDataStream – the Energy Industries Council’s global project tracking database – global CAPEX spend allocation from 2022-2027 is 63 percent for mature hydrocarbon and conventional power and 31 percent for mature renewable energy and clean technologies, while only 6 percent is within the energy transition, such as hydrogen and Carbon Capture and Storage/Carbon Capture Utilization and Storage (CCS/CCUS). The question must be asked: Why wasn’t the oil and gas sector present at COP26? The oil and gas sector has an enabler role to play toward the energy transition and achieving net-zero, especially as the sector realizes a recovery in oil prices and gas supply.

In fact, the oil and gas sector is changing at a rate faster than at any time in the industry’s history. Independent operators, contractors, service companies and the supply chain are adopting technologies – such as hydrogen and CCUS – to ensure competitive returns while balancing the industry’s increasing demand and transition to a lower carbon future. These companies will steer and transform the energy sector with capabilities to not only meet energy demand and provide for national security, but also to address carbon emissions across the value chain of future energy projects.

This transformation allows for opportunity. The integration of energy transition technologies and at-scale deployment, standardization, digitization, collaboration, electrification, etc., all provide for the delivery of lower CAPEX (and OPEX within the built environment), higher utilization, and indeed net-zero. This transformation is not one-size-fits all, as developing nations and national players must provide for interstate energy security and access. However, the oil and gas industry as a whole will lead the way to a reliable, responsible, and revolutionary energy future to come.

COP26 allowed an avenue for progress and addressing pathways to deter climate change. One thing is certain, Mother Nature is not compromising. Without a doubt, the energy industry must take the lead in addressing emissions – now. Lest humankind take a realistic approach to addressing an uncertain climate future, the opportunity costs will be futile.