Hydrocarbons in Energy Transition; Why, When, Where & How?

This article was first published in September 2023.

The key questions as to whether oil and gas will still play an important part in the future ‘Energy Transition Dilemma’ are surely “Why, When, Where and How?"

Why?

The huge divergence between the real facts and the perceptions about Energy Transition are demonstrated by the following bold statement received in a recent email offering training in renewables:

“Renewable energy is expected to meet global electricity demand in two years, with solar and wind power leading the way...”

Is it any wonder that the western world’s current energy transition policies are leading to a belief that they can simply stop hydrocarbon use and yet maintain their oil and gas dependent lifestyles?

Using wind as an example, it is true that the UK can now generate a large percentage of its energy in this way, but like many of the achievable energy replacements in the world today, it is not all it is being sold as. Wind only generates power when it’s windy.  It’s also not particularly cost effective, and at present depends upon large subsidies. The turbines are also not as environmentally friendly as we may think, as their blades are made out of non-recyclable hydrocarbons materials which are being buried in the USA after their 15 – 20 year life span!

There is no doubt that human activities and our emissions are having an influence on the world’s climate, but current facts suggest that achieving net zero by 2050 is a pipe dream based on there being no joined-up or achievable energy plan. Yes, renewables can and should be used to help reduce the global emissions but they cannot replace the hydrocarbons that still makes up 70-80% of the global energy mix.

Most forget that they also provide much of the raw material for so many of the products we all take for granted, such as fertiliser for food, any materials that include man-made fibres and plastics which are used in pretty much all manufactured goods.

Furthermore, hydrocarbons play a role in many pharmaceuticals used to treat disease, thus improving our health and potentially extending all our lives.

Any realistic and achievable formula for the Energy Transition will need to involve oil - and increasingly gas - for some time to come. It is the only way to satisfy global energy demands before an achievable and cost-effective alternative is found.

When?

Without more oil and gas being found (or less being used), an inevitable energy shortage will result in an unavoidable ‘energy supply crisis’. Perhaps then the investment markets that have funded very little, if any, E&P due to unregulated ESG (Environmental, Social and Governance), and have essentially stopped new sources of oil and gas being discovered since the oil price recovered in 2017-18, will be forced to open again to have any chance of meeting the world’s energy needs. ESG in its current form has probably caused more of a crisis than it was designed to prevent as the situation in Germany and New Zealand clearly demonstrates.

Where?

If and when new finance for E&P is forthcoming, where can we go to find new reserves of oil and gas? There are plenty of places across the globe that have not been explored, where we may find the 750 billion barrels of oil and gas equivalent estimated by some as the amount needed over the next few decades. This holds true even with the fastest energy transition scenarios being predicted.

The map highlights just a few areas of the world where E&P companies might focus their exploration activities. However, bear in mind that the historical exploration success tracked since around 2000 averages between 1:5 - 1:10 of the wells drilled with commercial success, and is in reality more like 1:15 – 1:20.

The risks of E&P are not only technical but also political, as in many parts of the world, oil and gas exploration is limited by wars and politics. On the map, the coloured rings highlight areas with technical, but also additional commercial, risk.

Selection of Possible Future International Hot Spots (Excluding N America)

How?

Technical risk is also defined by what it takes to successfully drill a 6” hole down several kilometres into the sub surface located in tens, hundreds or even thousands of square kilometres of a prospective basin. This simply requires the right technology, but more importantly the right people with the right knowledge and experience. Technology alone is not enough.

AI is likely to take years before it can be relied upon to achieve the historical levels of exploration in the future, and so we will need the same quality of technical people (i.e. geologist and geophysicists = geoscientists) who also have the necessary experience. Remember, you can locate and drill a 6” well down to 9,000 ft and be just 100ft away from penetrating the right geology. Those are the margins of success or failure!

So where are all these experienced G&G people going to come from? Experienced geoscientists – those who have been working for some decades are now retiring, and there exists a huge gap in the availability of younger geoscientists with the correct level experience to replace them. There is no easy answer to something that simply does not exist.

So Houston, we do have a problem where the fix is yet to be determined. But as they did to successfully to bring Apollo 13 home, I have to be confident that if and when the energy crisis does hit, those of us still involved in E&P are engaged to assist.

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