Platt, Chair of Energy Economics and Technology Committee and Principal Author of the report entitled: "Exploring the Energy Transition: Crosscurrents" reported to the AAPG Energy Minerals Division members in July, 2021 that the oil and gas industry is shifting attention to decarbonization only two years after setting records in oil, gas and products production and exports in 2019. This review examines the market turnaround after the pandemic, the shocks of the February winter storm across Texas and into the central U.S., and the heightened awareness it created about carefully constructing paths of decarbonization.
Getting to this Point.
Over much of the past decade, the author has noted with some irony how “fracking” (the technologies of geosteering, horizontal drilling, pressure pumping/hydraulic fracturing) enabled the “shale revolution” – arguably the greatest transformation in the United States’ energy posture during most of our lifetimes. For those both familiar with the oil/gas industry and those on the outside, it has always been difficult to convey the sense of scale of
this transformation.
Already awash in natural gas, the States’ relentless oil production and declining imports triggered the late-2014 oil price collapse and, likewise, an extraordinary step jump in global consumer energy cost savings (e.g. gasoline, jet fuel, natural gas and its twin, electricity, internationally traded pipeline gas, and liquefied natural gas). This consumers’ side of things was addressed in the author's 2016 review, whereas the 2017 review placed this
transformation in a historical context going back about fifty years. Portents of change on the environmental front received some attention in our 2018 review, yet the story that year was primarily one of burgeoning production.
The topic of decarbonization was touched on in our 2019 review (“Unease at the Top”) amid the election cycle’s political scramble. Curiously, the author also found that the seemingly new attention to the social dimensions of energy brought to the fore by the Green New Deal in early 2019 had been preceded by not only the U.N.’s Sustainable Development Goals but also a long history of formal U.S. government reporting, dating back over thirty years.
In 2020 (“Zenith to Nadir: Oil’s Woes in the Throes of Pandemic”), it was necessary to put aside decarbonization and give attention to the heated topic of the oil/gas industry’s deteriorating financial condition (in a nutshell, over-reliance on debt and equity financing and inadequate attention to free cash flow). Those are problems which long preceded the Pandemic. The author also tracked events unfolding that spring (lockdown/stay-at-home measures portrayed across both producing and consuming states, and the resulting demand shock). Accompanying these topics, we added some perspective on natural gas liquids markets and wellhead economic evaluations (Permian and Haynesville examples).
Today.
The current moment is characterized by an almost schizoid tension between financial relief and looming existential catastrophe, only presaged in 2018. The prospect of better financial times in the short to intermediate term, hinging on the rollout of vaccinations, is already evident. The change in U.S. government administration to one with an activist stance on climate change certainly signals greater action on that front, although it is hardly the only
such signal and possibly not the most important in terms of what will drive oil and natural gas demand over the intermediate term. Here, the author has in mind continuing and ratcheting individual state policies (also cities’ building codes and fleets, and their port operations), individual initiatives by energy producers (e.g. oil, gas, transmission/distribution, refining) and by major consuming companies (e.g. server farms, fleets, power producers, and a host of other companies). To this, outside pressures on companies’ boards and emergent anti-fossil lawsuits such as that waged against Royal Dutch Shell may accelerate steps regardless of prior announced greening policies or even their feasibility.
The author then briefly addresses in the rest of the report the financial turnaround in oil and gas prices, and then attributed attention to society’s not-so-sudden awakening to the challenges and opportunities presented by decarbonization.
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