The Future of Oil and Gas Globally

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The Future of Oil and Gas Globally

Dec 2, 2019

According to a report from the UN initiative Sustainable Energy for All, more than a “billion people” on earth live without access to electricity, especially sub Saharan countries of rapid population growth.

This report could help us as entrepreneurs, automobile executives, utility leaders or regulators, in order to predict the future of oil, gas and the overall energy consumption.

We should start thinking about alternatives, to generate more renewable sources of energy.

Since 2015, the “G7 summit” in Germany, there was one common goal globally, to shift our energy production and usage from fossil fuels to clean energy; clean electricity. 

To start talking about the future of oil and gas, we should talk about US.

Because it has shaped the future of oil and gas and this is a fact that we can’t ignore.

At the latest G7 summit, August 2019, Trump said the US has become

“the No. 1 energy producer in the world.”

but would it be that easy to be on the top of or one of the giant energy producers?

The Challenges and Opportunities that face the future of energy

“It’s interesting – a lot of the talk around oil and gas price volatility… you’ve got to remember, fundamentally, the price of the alternatives is coming down, they’re becoming more cost-competitive over time.”

Said Tom Delay told CNBC at the World Energy Congress in Istanbul.

  • The most renewable and clean sources of energy are the sun and the wind, but the sun doesn’t always shine and the wind doesn’t always blow.

Batteries that are made to store sun and wind energy are not cheap and so, not efficient enough to empower us with energy during their absence.

Nuclear energy produces few greenhouse gases so, it is considered environmentally friendly compared to coal power plants that generate electricity and pollute the air.

But storing carbon dioxide underground to turn it into liquid fuel “clean energy” to be stored again but in a fuel cell, is still under development and progress.

As scientists have developed an artificial way of photosynthesis, to convert CO2 and water into liquefied fuels “natural fuels”.

  • Another challenge is reducing the cost of diesel emission because it is too high.

The alternative is to use less petrol, to improve efficiency by hybridizing the gasoline.

Yet the future of energy is promising for power transformation

According to IRENA’s latest Renewable Energy Roadmap (REmap) 2018, around “65%” of the total final energy use will be made up of renewables in “2050”

About “85%” of the electricity generated will come from renewables of which “72%” will be supplied by solar and wind resources.

The world is embracing flexibility at all scales, it needs to shift from fossil fuel, nuclear energy and coal towards clean energy by all means.

This vision, in turn, will guide the way of protecting the environment and fighting climate change through peaceful means and resources.

Also trying to achieve political independence, in response to the presence of tensions and conflicts between countries and even in the same country.

It is all about securing renewable sources of energy, which means life to begin and revive.

Wind wins in Europe and composes a larger part of its energy by the time

Europe added “4.9 GW” of new wind energy capacity in the first half of 2019.

Besides its wide availability, its competitive edge makes it even more attractive.

“Wind energy is one of the cheapest natural resources because there… (are) zero marginal costs.”  said Jens Winkler, from wind energy company Enercon.

According to Jens is that:

The wind is not always blowing, so the big challenge, also, according to him: 

Is currently to… work on battery solutions where you can actually turn electricity into gas and then bring it back into (a) form of electricity afterward when you need it again.

Renewable energy wins in GCC 

Because the domestic demand for energy is increasing, GCC countries aim to depend on nuclear and renewable energy to fill this gap.

The UAE aims to make up the share of its renewable energy as “7 percent” by “2020” and Qatar aims to produce “20 percent” of electricity from renewable sources by “2030”.

Besides the upcoming diversified energy future, GCC is also committed to reducing its emissions.

In order to do so, GCC focused on solar energy, as it has one of the highest direct normal irradiation in the world, an opportunity that can’t be missed.

As a result, energy from PV: photovoltaic or solar energy paves its way due to the sunny weather.

In addition to the presence of relatively high competition from fossil fuels, there is also another challenge which is the dust and high temperature at the GCC.

This lowers the impact of the high production of solar energy at the GCC countries.

What are the trends that could affect the future of oil and gas?

  • Oil Supply and Demand

Supply of oil used to peak and decline, but now oil prices have decreasedو as it is present in plenty amount which makes it less attractive than before.

While the demand is expected to reach its peak during the period “2025 and 2040” and then gradually decline.

This prediction is acceptable, according to the previous example mentioned about GCC. 

For instance, demand will increase, as they face challenges in producing clean energy and because of the rush hours at a time when the sun is not shining.

Grids and fossil fuel systems are available, to back up renewable energy when they are not available.

  •  Gas Supply

Gas is used mainly for industrial purposes and not for transport, so it is unlike oil.

Oil is imported and exported globally on a large scale and this will continue to happen through pipelines across borders in the form of liquefied natural gas.

  • Corporates that join the playfield

BP plans to increase energy production from renewable sources, so the world depends on it more than fossil fuels, especially solar and wind power.

The manufacturing costs of solar and wind power are coming down which fosters their production. 

“Facebook” and “Google” are committed to powering their operations by “100%” renewable energy by the end of 2020. 

Along with auto manufacturers such as General Motors, they grow their investment in renewable sources of energy such as wind farm in Oklahoma.

  • The change in the transportation sector

The trend goes with driverless autonomous electric vehicles, so the demand for electricity will increase to be the most important part of the energy mix.

This demand is also related to consumer behavior, as it appears that they have desirability in Tesla electric vehicles.

Carpooling such as that of Uber and Hailo and electrification could shift the whole scene in transportation, but this still lies under the phase of trial and error.

Putting batteries in cars will enable it to act as moving energy storage devices.

It will not only consume energy from the grid but also supply power back when needed.

Ford Motor Co. announced that it will increase its investment in EV: electric vehicles to $11 billion by 2022.

Analysis from Reuters shows that the overall EV investment from global automakers to $90 billion. 

General Motors alone will contribute by bringing 20 new battery and fuel-cell electric models to market by 2023.

Countries such as China, India, France, Norway, and England have announced banning gas and diesel cars.

Other countries like Japan, Korea, Ireland, and Spain have defined sales targets for the EVs.

  • Millennials impact 

Millennials demand energy from different resources, as they are aware of climate change and accompanied environmental problems.

Because the digitalization has penetrated the working environment and workflow.

Also, the changing lifestyle of millennials is directly reflected in their consumption of energy.

According to the previous analysis, economic growth is going to occur in emerging economies (the non-OECD countries).

They also use mini-grid services and solar PV, to gain more clean energy.

Consumers are investing more in their household devices that encourage efficient use of energy supply.

Examples are many; such as Google Nest, a smart-home ecosystem, or energy-efficient light bulbs.

Also, transportation of goods will be increasing in the coming years worldwide and so the demand for energy. 

 This will even decrease grid-tied power demand.

  • Money flow

The research teams at Bloomberg New Energy Finance (BNEF) report that:

Renewable energy sources are set to represent almost three-quarters of the $10.2 trillion the world will invest in new power generating technology until 2040.

BNEF also reports that renewables will account for more than 60 percent of new energy investments, versus just 10 percent for coal and gas generation.

Investment-by-technology-2017-2040

Source: Bloomberg New Energy Finance

This will take place across the Asia Pacific region (including the Chinese and Indian economies).

Also, the market for “green bonds” securities is increasing over time.

This means that more investment and money are invested and therefore established projects for the benefit of our environment.

The 3D model of energy: Decentralization, Decarbonization, and Digitalization

  • Decentralization

It aims to improve air quality in cities and also reducing smog and carbon emissions.

In a nutshell, it means shifting from fossil fuels to renewable sources of energy such as solar and wind.

This can be implemented through the political framework of regulations to fight environmental pollution.

Examples of decentralization could be small plants or micro-generators.

It is to support and produce power for the specific areas, instead of depending on a centralized power grid.

This encourages democratization to foster development.

Decentralization applications are in many industrial countries where individual houses use solar panels or wind turbines.

Industrial sector should coordinate with customers to achieve this goal 

  • To help them increase their energy consumption from electricity.
  • To reduce their consumption that depends on fossil fuels.
  • Decarbonization

It is correlated with decentralization.

Decarbonization aims to reduce carbon emissions and to increase the energy supply from renewable sources of energy with the increasing number of energy producers.

To increase the efficiency of decarbonization, we should implement the concept of flexibility.

We have to focus on applying flexibility in operations, to generate more power through stronger grids.

E-mobility is a strong example of decarbonization that will grow in the near future.

Decarbonization is critical to achieve “electrification targets” among all sectors and also to help in building a sustainable world.

“50 coal-fired power plants” have shut down in the US since the last 2 years and its share in the energy mix decreases and that of renewable resources is increasing.

  • Digitalization

Digitalization has grown since 2014, when oil prices have dropped down.

  • In the era of “industrialization 4.0”, the Internet is a direct example that expresses the meaning and the importance of digitalization.

It goes hand in hand with decentralization through all industries.

According to CISCO, by 2020, there will be “30 billion connected devices”, thanks to IoT.

Digitization

ADNOC company has been aware of this concept, its CEO Al Jaber said:

“In short, as we enter a new age of technology, the world remains reliant on a 160-year-old industry, whose core mission is to responsibly and efficiently stay ahead of tomorrow’s energy demand.”

At Adnoc, they call this mission “Oil and Gas 4.0.” “Oil and Gas 4.0.” 

When we talk about digitalization as part of the 3D energy model, we should also refer to smart grids.

They are intelligent power grids that are integrated by IT systems, to create and connect the new network of producers and consumers.

This opens the door for new business models to come for new market participants of service providers, in order to provide higher stability,

  • Another application od digitalization is Quantum computers.

They are based on quantum theory. 

These computers use subatomic particles for data storage and data processing, so they perform faster and better than traditional computers.

The population growth rate and renewable energy production demand and supply are increasing at the same time.

So, quantum computers will affect our future of energy in many ways.

Conclusion:

The previous model will shift the economic power from oil-rich countries (OECD) to mineral-rich countries. 

It will also affect utilities in EU and US and automobile manufacturers as well.

Also, It is not just the role of producers but consumers to apply the 3D model of energy on a larger scale.

History and insights can give us a vision of the bright side of the coming future.

The environmentally friendly techniques should lead our way through this journey of the energy transition

Analysis from all sides will guide us to contribute to our world empowerment and increasing economic growth.

FAQs

What is 3D model of energy?

It consists of Digitization, Decarbonization, and Decentralization.

What are the trends that could affect the future of oil and

-Oil Supply and Demand -Gas Supply -Corporates that join the playfield. -The change in the transportation sector -Millennials impact -Money flow

What are the challenges and opportunities of oil and gas?

The sun doesn’t always shine and the wind doesn’t always blow. Another challenge is reducing the cost of diesel emission because it is too high. Yet the future of energy is promising for power transformation especially in Europe.

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