As the world transitions to a more sustainable future, players in the oil and gas industry are proactively adapting by diversifying their portfolios becoming energy companies with a commitment to a net zero future. To do that safely and profitably, all aspects of the transition and the options available need to be carefully weighed and measured before commitments are made and that will almost certainly require risk management and digital solutions expertise. Only then can the investments be made for large scale energy transition.
Our modern world and way of life relies on energy more than at any time in human history and there is little evidence to suggest that will change in the future. Fossil fuels such as oil, gas and coal currently provide the greatest part of that energy but the need for the world to transition to a more sustainable energy mix has been apparent for many years.
Presently the world is experiencing what has come to be known as the energy trilemma – three factors that need to be addressed and a balance found between them. The factors are sustainability, affordability and security. The latter has taken on particular significance since the Russian incursion into Ukraine and the sanctions on Russian oil and gas supplies imposed by most countries in Europe and North America. However, while this has had a severe initial impact, there is a widely held belief that the impact will not be a long term one.
DNV’s Energy Transition Outlook 2023 Report made the point that DNV has been clear and consistent in its Energy Transition Outlooks cover the years, and that is the demand for fossil energy – coal, oil, and gas combined – will begin an inexorable decline before the end of this decade. For the first time this year, the International Energy Agency (IEA) concurs with DNV’s view and has begun to state that the world is at the “beginning of the end” of the fossil-fuel era.
Moreover, in its 2022 Annual World Energy Output report, the IEA makes the point that there is a mistaken belief that the world is experiencing a clean energy crisis and points out that the world is struggling with too little clean energy and a faster clean energy transition would have helped moderate the impact of the rise in energy costs.
The IEA report also suggests that there is an opportunity for an historic turning point towards a cleaner and more secure energy system thanks to the unprecedented response from governments around the world. It especially mentions the Inflation Reduction Act in the United States, the Fit for 55 package and REPowerEU in the European Union, Japan's Green Transformation programme and initiatives such as South Korea’s aim to increase its share of nuclear power.
Call to accelerate the energy transition
These matters were high on the agenda at the G7 group meeting in Japan in May 2023 where the leaders of seven major economies agreed to accelerate the energy transition and called upon other nations to phase out coal power. The G7 intends to expand renewable energy globally and bring down costs by strengthening capacity, including through a collective increase in offshore wind of 150 GW by 2030, based on each country’s existing targets, and a collective increase of solar PV to more than 1 TW by 2030. Investment in gas and nuclear were also approved as meeting the security and sustainability aspects.
DNV’s Energy Transition Outlook 2023 Report and its other insights into the energy transition come to the conclusion that despite an urgency of action, global CO2 emissions remain at record levels. However, it forecasts that energy-related emissions will almost halve (-46%) between now and 2050, once they have peaked in 2024 at 34 GtCO2. It then estimates the climate impact in conjunction with other greenhouse gas emissions after 2050 and finds that the world is on track to experience 2.2 degrees of warming by the end of this century.
On the positive side, DNV reports that electricity production is growing and greening everywhere reaching an estimated 83% renewable share in the 2050 electricity mix.
Challenges and barriers to a greener future
Clearly, the energy transition is becoming more imperative and some energy companies are already diversifying their portfolios with renewables and the low carbon segment, including alternative future fuels such as ammonia, methanol and hydrogen being high on the list. Carbon capture utilisation and storage (CCUS) is also seen as being important to develop while fossil fuels remain in the energy mix because it dilutes the impact on the environment.
Deciding on the right direction to travel is not being made easy because many national governments are still evaluating and charting roadmaps to allow gas blends into the infrastructure. Consequently, companies are planning and preparing for multiple scenarios. Added to this, safety issues have not yet been fully mapped out and there also concerns around the production, storage and transportation of the new energy mix which is also challenging for operators.
CCUS, for example, will require means to transport large amounts of pressurised liquid CO2 and reliable consequence models for safety assessments. Safe design of storage systems and documentation are essential.
Hydrogen is also considered to be essential for the future energy mix either as pure hydrogen or in a carrier such as ammonia or in combination with natural gas. Once again there are safety concerns, but in this case the high flammability of gaseous hydrogen and the very high pressures and cryogenic temperatures associated with liquid hydrogen are the major concerns. Not all current safety regulations and standards used for hydrocarbon fuels are applicable to hydrogen, so this is an area where much work in developing methods and standards is needed. Ammonia being a zero-carbon substance would seem an ideal fuel, but it also presents challenges, although here it is less the flammability but the toxicity that is an issue.
Overcoming the obstacles
It cannot be over emphasised that there are no quick fixes, the energy transition will involve the use of multiple energy sources and solutions including alternative fuels, gas, ammonia, hydrogen, CCUS, renewables, hydro, wind, solar and nuclear. The exact mix will vary and depend on geographies and economic developments.
The energy transition will also require new technologies and business models to be developed and some of the existing complex systems also need transformation. Since affordability is one part of the trilemma, cost control will require that where possible existing infrastructure can be reused or repurposed.
One recognised area for savings is in the transport of hydrogen. This could see more than 50% of hydrogen pipelines globally being repurposed from existing natural gas pipelines, rising to as high as 80% in some regions such as UK. Some tests have already been carried out with gas containing 20% of hydrogen being moved by pipelines. The savings could be considerable as the cost to repurpose pipelines is expected to be just 10-35% of new construction costs.
There will also be many newly built pipelines used in parallel with natural gas pipelines until the gas pipeline may be retrofitted when natural gas flows stops or contracts ends. One challenge here could be the agreement to get all stakeholders to agree. Many pipelines are owned by multiple parties some state-owned and some private companies.
Managing risk with confidence
DNV has a long legacy and domain expertise offering software and digital solutions. Importantly, the company is also working with stakeholders to aid the development of procedures and standards for operating the new facilities and pipelines that will be required in the energy transition. Work has been ongoing for many years and DNV has been able to model the behaviour of new fuels, and also CO2 with regards to capture, utilisation and storage. The specialised software is in continuous development and, as an example of its collaborative approach, three JIPs are currently underway involving industry partners who are exploring the risks of CO2, hydrogen and ammonia.
The CO2 research concentrates on the consequences of accidental release, depending on surrounding environmental conditions, combined with dry-ice formation and its impact on dispersion. The hydrogen project is concerned with the consequences of low storage temperatures, dispersion, fires and explosivity and the ammonia project is aimed at developing solutions for ammonia safety and analysing alternative strategies to mitigate consequences of toxicity.
DNV is also putting significant effort into validating and testing its models at the Spadeadam Testing and Research Centre.
Contact us
