Oil & gas alongside green and low-carbon energy: Will such a compass lead the world astray or steer it in the right direction?

While the global energy demand outlook remains robust and many projects are in the pipeline – ranging from oil, gas, and LNG to renewables and other clean energy sources of supply – rising costs, capital access headwinds, and strained supply chains are still looming large on the energy horizon. Should the world aim for a balancing act to satisfy both energy security and green future aspirations or pick just one as its primary focus while hoping that the other one will be sorted out in the process?

The energy industry is no stranger to navigating the uncertainty-infested waters around the globe due to a myriad of diverse factors, including growing geopolitical tensions and green transition pressures, which are changing the energy ecosystem and forcing it to evolve faster. As viable clean alternatives to fossil fuels are not yet fully scalable, it is rather difficult to set an exact date for the phase-out of coal, oil, and gas.

While painting a clearer picture of the risks and opportunities in the energy industry, many vehemently highlight the need for a fair, just, and inclusive energy transition, as there is no one-size-fits-all piece of the sustainable transformation puzzle nor a silver bullet for the climate crisis.

Despite the energy security woes, global climate movements have forced governments to place fossil fuels at the center of COP28 climate talks. Even though most see the achievement of the latest COP outcome as historic, this does not stop many of them from pointing out that the final text is still a watered-down version with multiple loopholes compared to what the science demands to stay on net zero course and reach the Paris Agreement goals.

Those who want to put an end to the coal, oil, and gas era claim that COP28 made several allowances for fossil fuel industry spins, such as natural gas and LNG being labeled as transition fuels, coupled with a lack of binding commitments and finance required to keep these fuels in the ground.

COP28 ended with the call to transition away from coal, oil, and gas, leaving all the cards in nations’ hands to make this happen by pursuing either a gradual shift to clean energy or even a clean break if that is what a particular country wants to do. As a result, climate campaigners are gearing up to turn their collective power from demanding a phase-out of fossil fuels into creating a mechanism to make it a reality, bringing about what they consider to be a fast, fair, and financially covered transition.

Taking into consideration the fact that the security of supply concerns remain high while the energy transition continues to make inroads – albeit at a slower pace than some would like – is a sudden end to all fossil fuels across the globe the right move or even a possibility given the rise in energy demand and population growth, especially in certain parts of the world where energy demand has outpaced supply? Striking the right balance between energy security and sustainability aspirations seems to be a tough nut to crack for most – if not all – countries around the world.

The IMF’s recent analysis shows that low-carbon investments need to be five times higher than they were in 2020, as $5 trillion per year is required by 2050 to reach climate goals. In a bid to shed some light on the energy trends and expectations in 2024 and beyond, Offshore Energy set up a poll to gauge the dominant currents in the industry by asking participants, including those from both the developer and supply chain sides, to pick what they consider to be the right answer to the question: ‘What does the world need more of in 2024 and beyond?’ Nearly 400 participants decided to weigh in on the issue.

The poll’s results show that out of the 362 participants, 31% have cast their votes in favor of more oil, gas, and LNG; 15% want to see more renewables; 10% are keen on further nuclear and low-carbon energy developments while the highest number of participants, or 44%, are convinced that the world needs all of the above. These results are in line with the views, expressed by OPEC, CEOs of ExxonMobil, Aramco, QatarEnergy, etc. Such views underline that the world needs all the energy solutions it can get its hands on to meet growing energy demand and avert a more serious energy crisis while sidestepping a North-South transition divide.

In 2023, a panel session during Energy Capital & Power’s MSGBC Oil, Gas & Power 2023 conference and exhibition looked into the future of natural gas in the rapidly changing global energy landscape, spotlighting its role in stabilizing the path towards renewable energy development while curbing the carbon footprint in the short term.

Khroumbaly Lehbib, Advisor for Hydrocarbons for Mauritania’s Ministry of Petroleum, Mines and Energy, stated: “The government’s role is to create a stable legal and regulatory regime to partner with capable national and international companies who can deliver on their commitment. We have good quality partners in the energy and oil and gas sectors, and we hope that in the next ten years, MSGBC can become one of the biggest global players in the oil and natural gas markets.”

The participants highlighted the potential of natural gas to drive electrification, socioeconomic development, and resource monetization in Africa while coming to the conclusion that the share of the fuel in the global energy mix was poised to jump to 26% by 2050.

Rafik Amara, Senior Gas Analyst for the Gas Exporting Countries Forum, commented: “The role of gas is huge and has a very bright future. We are seeing that natural gas will overcome coal in the energy mix in the next three to four years and will be the most-used fuel from 2040 onwards. Natural gas is the only approach to achieving energy market stability.”

The panelists also underlined the importance of regional gas-to-power development and LNG export as a model to ensure and develop consistent economic development. Natural gas is forecasted to be responsible for around 30% of Africa’s total energy demand increase by 2050.

Ousmane Ndoye, Managing Director for Senegal at GE Vernova, said: “The more we advance in the efficiency of gas turbines, the more we lean towards gas-focused solutions. Gas is a key differentiator for the region today. It allows for rapid growth, thanks to quick access to electricity and it is also a reliable and sustainable transitional energy.”

Furthermore, even the International Energy Agency (IEA) has acknowledged that it is impossible to reach universal energy access in certain regions such as Africa without an energy mix that entails not just renewables but also natural gas. As renewable energy investment on the continent has not been at a high enough level so far, natural gas is seen as the best candidate for reducing the shortfall.

Therefore, a just and equitable energy transition in Africa does not look the same as in Europe or in the U.S. which is why a lot of organizations, governments, and people in Africa insist on the deployment of gas as a transition fuel, until it can be replaced by green energy. Regardless of calls to end the current dash for gas in Africa, many are under the impression that cutting off gas investments will have a crippling effect on the continent’s overall development, diminishing its means of enabling energy access to the people who live there.

With this in mind, Ajay Banga, World Bank’s President, emphasized at COP28 the growing gap and distrust between developing countries and developed ones regarding climate action. This stems from the expectations some have voiced about pushing everyone to adhere to the same rules to mitigate climate change, which would force low and middle-income nations to stop their development and throw away the same energy sources that allowed developed economies to thrive for decades.

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Therefore, Banga underscores the need to provide the capital for a cleaner energy transition to stop this distrust from spreading further. For Africa, the lowest emissions route to energy access seems to be natural gas, despite arguments that such investments are not a good move from the economic perspective, as they would spur long-term commitment to fossil fuel infrastructure.

While renewable energy technologies are expected to experience a decline in costs, transmission and battery storage requirements for renewables come with a high price tag but are in scares supply in Africa. In light of this, natural gas is expected to play a key role in opening energy doors for the continent in the medium to long term until all pieces of the clean energy transition fall into place, including green energy generation, transmission, and storage infrastructure.

Without natural gas and LNG, the disparity in energy consumption on the continent is poised to grow further. However, COP28 did set sustainability guidelines to future-proof a greener energy grid by emphasizing the need to triple the renewable energy capacity, as the world is not on track to achieve the equitable and sustainable energy access goals previously set by the UN.

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Exodigo’s Bret Simon, noted: “While the energy ecosystem grapples to keep pace with current demands and rising environmental, operational and expansion pressures, COP28 is shining a spotlight on current gaps and future failure points. Traditional centralized, unidirectional distribution models won’t work in the next era of energy. Ignoring the need to evolve the grid is no longer an option.

“From rooftop solar and EVs to battery storage solutions, the demands of distributed energy resources (DERs) will continue to create consumer-driven pressure for a modern decentralized, democratic grid. DERs will be the linchpin for grid transformation; energy players need to take a more active role driving the industry toward a greener grid. To design, create and properly deploy/maintain more efficient and effective renewable energy systems, the industry needs to rethink substation and storage facility plans and overhaul how lines are located, laid, repaired, removed or replaced.”

While energy transition has its challenges, many studies have shown that it also brings a lot of benefits to the table, including new global job opportunities for people. This was demonstrated once again by a recent study from X-Academy, which forecasted a growth of 22% or 73,000 jobs in the UK energy sector by 2030 if governments and industry work together to accelerate the transition to clean energy.

Peter Tipler, Managing Director of X-Academy, remarked: “Seizing the jobs opportunity in the global energy sector to create experienced capability and capacity in low carbon and renewables will ensure energy security, tackle climate change and power a new net zero economy. Irrespective of future policy, more people are needed to support our energy system. To secure that future and have the capacity in place, we need to employ more people now. The risk of not moving fast enough is likely to stall projects and investments.

“X-Academy exists as a government and industry delivery partner to accelerate energy jobs. Our overarching recommendation is for public and private sectors to work in partnership to speed up progress. Targeted roles and increased labor in critical-path regions will act as a catalyst to the UK becoming a clean energy superpower.”

In addition, the research underlines that grid-related employment could see a further 50,000 new jobs by 2030 while biomass/bioenergy, CCUS, wind, and hydrogen are marked for growth even in the most pessimistic combination of all forecast scenarios. Within the report, X-Academy recommended eight steps to enable the acceleration of new energy jobs, covering the creation of more visible jobs, showcasing the sector as an attractive and diverse place to work, and amplifying regional contexts with life-long careers.

Andy Samuel, X-Academy Strategic Advisor, stated: “The energy transition is a massive investment opportunity and challenge. Pace is required, more than ever, as the climate crisis deepens. Consistent policies with the right incentives and measures to remove barriers such as planning, and grid connections are vital. Equally great people and innovation are essential to progress projects to investment decisions. Now is the time to seize the energy jobs opportunity.”

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