In focus: Tackling energy trilemma with oil & gas industry calling the shots

The energy and climate crises are not a mirage and neither will go away just because one wills it to do so, thus, getting to grips with both is no easy feat. However, the delivery of low-carbon energy infrastructure is often seen as the solution for handling both, but this requires a significant ramp-up in investments. With the global oil and gas industry’s income skyrocketing to nearly $4 trillion in 2022, many are of the opinion that this sector holds the purse strings. Will it tighten or loosen them to invest a considerable chunk in the clean energy transition?

After the global energy crisis took the world by storm in 2022, the energy trilemma became a huge challenge for the energy industry. Embracing this challenge of energy sustainability, affordability, and security, the industry embarked on a quest to find solutions to tackle it. However, energy security quickly took charge, turning into a prevailing concern for countries worldwide. According to DNV, a Norway-based classification society, energy security will continue to run the show in 2023, outweighing clean and affordable energy on the list of priorities for energy companies globally.

The industry believes that the energy trilemma will be in the driving seat for a considerable time, as the energy system is expected to keep struggling on all three aspects without resolving this in the next decade. While energy security will pull the strings for oil, gas and power sectors with renewable energy players maintaining their clean energy focus in the year ahead, DNV claims that the industrial energy consumers’ priorities will put accessible and affordable energy at the forefront.  

Furthermore, DNV points out that oil and gas companies are slowing their shift into areas outside of core hydrocarbon businesses and holding back their focus on decarbonisation compared to 2022. While the oil and gas industry is expected to boost investments in gas and oil in 2023, the energy industry’s investment in clean energy sources and carriers is anticipated to be stepped up as well, especially in low-carbon hydrogen/ammonia, wind, and solar. In addition, investments in carbon capture and storage (CCS) and enabling technologies, such as energy efficiency, digitalisation, and energy storage technologies are also expected to be scaled up.

With majority of energy professionals believing the energy transition is accelerating while just 39 per cent are confident about meeting decarbonisation and climate targets, Ditlev Engel, CEO of Energy Systems at DNV, remarked: “The trilemma is also in transition. In a complex and difficult year for the energy industry, we see the trilemma leading to competing priorities. But in a decarbonised energy system, energy sustainability, affordability, and security actually all pull in the same direction, and the public and private sector can resolve the trilemma through a new approach to scaling and implementation.”

As DNV’s research finds that the lack of policy/government support and permitting/licensing issues are the greatest barriers to growth in the renewables sector, Engel underlines: “In the year ahead, we may see a slowing in the scale-down of fossil fuels, but potentially also a slowing in the scale-up of clean energy – if barriers aren’t overcome. Governments and policymakers must step up and remove barriers to implementation, and everyone in the energy industry must push forward in the transition.”

The global oil and gas industry’s income jumped to almost $4 trillion in 2022 from its recent average of $1.5 trillion. With fossil fuel subsidies being seen as roadblocks in the transition to clean energy sources, a recent analysis from the International Energy Agency (IEA) shows fossil fuel consumption subsidies rose to a record of over $1 trillion in 2022, as governments acted to limit the impacts of the energy crisis on consumers and energy bills.

However, IEA claims that faster transitions, not subsidies, are the way forward. In line with this, Worley and Princeton University’s Andlinger Center for Energy highlight that countries need to move from years to weeks to develop and build their low-carbon energy infrastructure to meet the net-zero challenge.

The two players’ findings indicate that $4-5 trillion of global annual investment is needed to achieve net-zero CO2 emissions by 2050 while all new carbon capture and storage and nuclear facilities need to be in the planning stage by 2030 if they are to be operational by 2050.

The duo claims that continuing to develop and build the infrastructure the way it is currently done will not be sufficient, thus, “a radical but durable new paradigm for infrastructure delivery” with systemic changes to the way “we share value, develop technologies, standardise designs, create partnerships, collaborate, and embrace digital tools and thinking” will need to be established to provide the foundation to move confidently towards net-zero by mid-century. 

Dr Clare Anderson, Director, Sustainability Performance, commented: “The biggest challenge is the scale and pace required to reach net-zero by 2050. It’s an enormous undertaking. But it’s also a huge opportunity. To overcome this challenge, we are going to need to form new partnerships and develop new ways of working.”

Decarbonisation of the energy sector is gaining momentum and the industry players have certainly taken to heart the recommendation of joining forces to explore and find new solutions, as demonstrated by Valverde Power Solutions, MISC Berhad, Clean Energy Systems, and Aker Solutions, who opted to pool resources on a quest to decarbonise oil and natural gas field operations.

These four companies will work together to specify and fund preliminary front-end engineering design (pre-FEED) to assess and demonstrate two North American emission-free power projects, utilising Clean Energy Systems’ Oxy-Fuel burner technology, which is designed to provide 10 MW to 100 MW of emission-free electrical power.

By utilising the Oxy-Fuel burner technology in an oil and gas field setting, the Hestia Demo Project is expected to meaningfully address both Scope 1 and Scope 2 GHG emissions, generate emission-free power, sequester CO2 and provide a solution for stranded natural gas reserves. The Hestia team will also be joined by the Dutch engineering and project development group, TriGen Energy, and Alberta-based Craft Power.

Truls Normann, Senior Vice President of Aker Solutions’ Power Solutions segment, highlighted: “The CCUS technology being piloted in the Hestia project is unique and could prove to be a major tool in oil and gas field decarbonisation. It produces affordable, reliable, and safe power at the oil and gas field while capturing the CO2 as part of the combustion, thus allowing it to be reinjected into the very same gas field.”

Normann also sees “great potential for producing emission-free power for offshore installations. It could also act as base power for offshore wind and complement green hydrogen production. Regarding the latter, excessive oxygen from green hydrogen production could be used to boost efficiency.”

Today, hydrogen, especially the green variety, is considered to be one of the most sought-after methods in the energy decarbonisation game, which is gaining ground despite current blind spots and pitfalls associated with the risk of leaks undermining its climate benefits. Hydrogen’s rise to stardom in the decarbonisation journey is illustrated by multiple recent developments in the energy industry, including the launch of a green hydrogen cluster of the Valencia region (HyVal) at BP’s Castellón refinery in Spain.

The UK-based energy giant is pursuing phased development of up to 2 GW of electrolysis capacity by 2030 for producing green hydrogen at its Castellón refinery with HyVal playing an instrumental role in decarbonising the oil major’s operations. The first phase is anticipated to be operational in 2027 with the installation of at least a 200 MW electrolysis plant, producing up to 31,200 tonnes of green hydrogen per year.

On the other hand, the second phase is slated to be completed in 2030, expanding the electrolysis plant to reach a capacity of up to 2 GW of net installed power. The transformation of the refinery, covering green hydrogen, biofuels and renewable energy, could see BP invest a total of up to €2 billion or nearly $2.14 billion by 2030 while the production of biofuels is anticipated to increase three-fold.

Aside from green hydrogen, ammonia is also making inroads on the global decarbonisation stage, as another fuel of the future, which is hammered home by a memorandum of understanding inked by CF Industries Holdings, a Chicago-based ammonia producer, and Lotte Chemical Corporation, a South Korean chemical company, for a joint exploration of clean ammonia production and its long-term offtake into South Korea.

The two players see this deal as a framework to assess the joint development and investment in a greenfield clean ammonia production facility in the U.S. – including at CF Industries’ Blue Point Complex in Louisiana – which would leverage carbon capture and sequestration technologies to reduce CO2 emissions from the ammonia production process to a level that meets or exceeds South Korea’s clean ammonia requirements. Additionally, the two companies intend to quantify the expected clean ammonia demand in South Korea for power generation, bunkering and other sectors.

Jin-koo Hwang, Head of hydrogen energy business at Lotte Chemical, remarked: “In order to bolster the domestic hydrogen economy, it is important to secure a stable supply of clean hydrogen and ammonia, especially in overseas regions with abundant energy and low geopolitical risks.”

Ever since the shipping industry jumped on the decarbonisation bandwagon, it has been looking into ways to slash its carbon footprint, including the use of low-carbon and green fuels along with liquefied natural gas (LNG). The shipping industry’s zest for decarbonisation is demonstrated by the U.S. ports, which are expected to build out nearly $50 billion in green infrastructure over the next decade.

A recent survey from the American Association of Port Authorities (AAPA) showed that hydrogen would play a significant role in the industry’s plans. This survey shows that ports’ interests are mostly tied to electric cargo handling equipment, shore power for vessels at berth, electric grid infrastructure, and hydrogen energy infrastructure.

The inaugural POWERS summit confirmed the findings of this survey, as it called on federal policymakers to advance five policy pillars seen as the key to meeting the nation’s energy supply and sustainability objectives.

These pillars entail increasing American energy exports; bolstering production and use of alternative fuels such as LNG, propane, hydrogen, methanol and ammonia in land-side vehicles and marine vessels; enhancing port electrification; strengthening port resilience to protect the supply chain; and ramping up the build-out of offshore wind infrastructure.

Recently, Westwood underscored that several renewable technologies were set for growth in a bid to accelerate the energy transition and some of these, such as floating offshore wind technology, are still in their infancy. Despite this, the energy market research firm sees potential in floating offshore wind to “democratise offshore power for the entire world and be the foundation of an ocean industrial revolution.” 

The Sustainable Energy Authority of Ireland (SEAI) seems to agree with Westwood’s assessment of the potential held by floating offshore wind, as it is setting the wheels into motion for offshore surveys to be conducted next month at its Atlantic Marine Energy Test Site (AMETS), which has been in development for several years. Aside from this, SEAI has also kicked off work on procuring an onshore substation and a floating LiDAR for AMETS.

Located offshore Ireland’s west coast in Mayo County, AMETS, a floating wind and wave energy technology test site, has two testing areas: AMETS A, located 16 kilometres northwest of Belderra Strand in a water depth of up to 100 metres, and AMETS B, located 6 kilometres off Belderra Strand where the water depth reaches 50 metres.

While the maximum electricity export capacity for the entire test site is currently 10 MW, SEAI is likely to seek an increase to 20 MW for the grid connection capacity of the test site and could designate Test Site A for floating wind technology, while Test Site B would be used to test wave energy converters (WECs).

As pressure mounts on oil and gas players to curb the carbon footprint of their operations, offshore wind is emerging as a useful tool to be added to the decarbonisation arsenal. To this end, Flotation Energy and Vårgrønn, who recently filed a marine licence application for their 500 MW Green Volt floating wind farm in Scotland, submitted a scoping report for the 1.4 GW Cenos floating offshore wind farm to Marine Scotland, as part of the Crown Estate Scotland’s Innovation and Targeted Oil and Gas (INTOG) leasing round. The winners of this round are expected to be announced in the second quarter of 2023.

According to the developers, both offshore wind farms are planned to provide renewable energy to oil and gas platforms, as well as consumers across the UK. With a combined capacity of almost 2 GW, these two projects will support the North Sea Transition Deal’s goal to halve offshore emissions by 2030, as well as make a significant contribution to meeting Scotland’s 2045 net-zero target. While the Green Volt wind farm is expected to start producing electricity in 2026, Cenos is slated to come online two years later.

Lord Nicol Stephen, CEO & Co-founder of Flotation Energy, pointed out: “Submission of the Cenos scoping report keeps us on track to deliver renewable power to many of the oil and gas platforms in the central North Sea as early as 2028.”

Based on Ocean Energy Europe (OEE)’s latest statistics report for 2022, less projects hit European waters in 2022 than in any year since 2010, putting its industrial leadership in ocean energy at risk. Therefore, this is seen as a warning sign for Europe’s global cleantech ambitions and the way in which the bloc responds to the test of its leadership in wave and tidal energy will be an object lesson for its wider Green Deal industrial vision.

Rémi Gruet, CEO of OEE, outlined: “The Net Zero Industry Act should explicitly include the offshore strategy’s target of 1 GW of ocean energy by 2030. And the Sovereignty Fund should support this target with a €1 billion earmarked budget. This will give much-needed teeth to the EU’s offshore renewables ambitions.”

A further ramp-up of ocean energy resources is also important to Taiwan, as shown by a recent collaboration deal between Sweden’s Minesto and Taiwan Cement Green Energy (TCCGE), enabling the duo to pursue tidal and ocean current energy build-out in Taiwan.

The energy transition, which is pushing decarbonisation forward, has a wide variety of methods at its disposal and carbon, capture and storage is among the highest-ranking ones in this repertoire. In line with this, three energy players – Neptune Energy, Sval Energi and Storegga – handed over an application to the Norwegian Ministry of Petroleum and Energy for a CO2 storage project with a potential to store up to 225 million tonnes of CO2 in the Norwegian sector of the North Sea.

Moreover, the project, called Trudvang, envisages the capture of CO2 by multiple industrial emitters in Northern Europe and the UK, the shipping of liquid CO2 from export terminals to an onshore receiving terminal in the southwest of Norway, and transport via a purpose-built pipeline to the Trudvang location for injection and permanent storage.

Pål Haremo, Neptune Energy’s Global Head of Subsurface, New Energy, claims: “The North Sea has great potential as a hub for carbon storage given the availability and proximity of existing infrastructure, depleted reservoirs, and saline aquifers.”

The storage license for the project is located to the east of the Sleipner field and about 165 kilometres from the coast while the storage reservoir lies at a depth of approximately 850 metres in the Utsira formation. The injection of CO2 is slated for 2029.

All these developments are a small portion of the efforts and initiatives springing up left and right to bring about the green shift and pivot to low-carbon and renewable energy sources on the road to net-zero by 2050.

However, this is just the tip of the iceberg and much more is needed to tick all the required boxes and bring the much-anticipated sustainable energy future to life. Whether the oil and gas industry will foot a big portion of this bill, remains to be seen.