Energy Industry's Response to Climate Change- Opportunities and challenges

Dr Ivan Marten, Senior Advisor, BCG moderated the session. The other Panelists included : Mr Utpal Bora, CMD, Oil India, Mr SSV Ramakumar, Director (R&D), Indian Oil, Mr Uwem Ukpong, Chief Global Operations and Integration Officer at BHGE, Mr Marcus Richards, MD, Oil & Gas Management Consulting Ltd, Mr Nick Norton, Senior Energy Advisor, International Energy Unit(IEU), Ms Susan Joy Allchurch, Chief ,UN Global Compact.

Dr Ivan Marten started the discussion by giving an overview of the current climate change scenario in the world and how the current carbon reduction policies in the world are not going to be enough to meet the COP21 targets. Emissions globally are steadily rising on account of increasing economic activity and emission in developing countries like India have been growing faster still. India, however, is in a good shape to meet its carbon reduction targets driven by multiple initiatives around renewable energy, biofuels, electric vehicles, efficient lighting and natural gas.

Plenary session in progress

The O&G industry needs to become a part of the solution and formulate a strategy by answering two key questions – How should O&G companies effectively respond to climate change and is there a need of moving towards greener portfolios; and what companies should do to better articulate their value proposition. Many Indian and global companies have already started on this pursuit by investing more in greener portfolios, creating collaborations to better tackle this strategy, and initiating marketing programs to propagate their message more effectively.

The discussion was started by Mr Nick Norton, Senior Energy Advisor to the Foreign and Commonwealth Office, who started off by mentioning that the world still has a long way to go in reaching the climate change objective. He also shared lessons from UK’s journey on this mission. UK was an early entrant in this mission and instituted policy on climate change as far back as 2008. The Climate Change Committee was envisioned as an independent advisory committee on this topic. UK has a target of reducing its greenhouse gas emissions by 80% over 1990 levels by 2050 and country is now ahead of its targets in this regard. He mentioned that they got lucky with gas resources in the country and didn’t have to build many coal plants. Therefore, the mission of phasing out their coal plants is easier. However, a bigger challenge is changing the consumer needs of oil & gas. In this regard, they have a policy in place stipulating no new petrol/diesel only cars by 2030. This will put a lot of pressure on the downstream petroleum industry.

Marcus Richards, MD of Oil & Gas Management Consulting Limited, started off by saying that when IPCC released its first climate change report, it challenged conventions. Instead of taking strong unilateral actions globally, efforts are being made to address climate change with a progressive transition. Collaboration is key to achieve goals for climate change. There are various measures which can be taken in this regard, such as reduce flaring to zero, efficiency in upstream businesses which can be implemented into the downstream too. Strategy in addressing climate change in O&G business is not consistent. Oil & gas companies today are expanding their value chain presence horizontally and vertically. Hence, imbibing climate change targets in the long term strategy becomes imperative. There are many disruptions in the transition happening due to climate change actions. For e.g., In Europe, around 60% of the gross margins in refining is at risk with increased usage of EVs. He also suggested various options for O&G companies to expand their business outside hydrocarbons – off-grid solutions, underground storage, energy efficiency, plastic recycling into fuels, and finding lithium which is not very different from hydrocarbons E&P. To conclude, he mentioned that it is very important today for O&G companies to articulate their strategies which shows their commitment rather than giving out mixed signals.

Mr Utpal Bora, CMD of Oil India, mentioned that oil and gas is going to remain an important part of our energy mix and EVs are not going to impose major disruptions. He emphasized that gas will be a game changer in this industry. India has an abundant gas reserves. EV and gas based vehicles are going to form the future by supplementing each other. Gas and renewables together will also form the power generation future. PNG and LNG for cooking in urban and rural households is also in line with broader goals.

Dr Rama Kumar, Director R&D from IOCL, reiterated that India’s GHG emissions are very small as compared to the developed world. India’s per capita emissions growth has also slowed down recently. He suggested a stabilization strategy to put a check on emissions growth. The options available for India to reduce emissions include hydrogen batteries, hybrid fuel and dual fuel vehicles, fuels through GTL and BTL, biodiesel and ethanol, CNG and LPG, clean liquid fuels etc. He also mentioned other ways to reduce emission. One such way is to use more energy efficient lubricants. IOCL is also working on 2nd and 3rd generation biofuels. He invited international support in containing carbon emissions by making carbon sequestration technology commercially viable.

Nick Norton, Chief Global Operations and Integration Officer at BHGE, started off by saying that it is also a moral responsibility of technical companies to support the O&G industry in reducing emissions. He mentioned that BHGE has taken on huge challenges in reducing carbon emissions. They’ve, in fact, reduced carbon emissions by 26% since 2012. They’ve also instituted a carbon management practice to support O&G companies in accurately measuring and reducing their emissions. They’ve also laid out a low carbon technology roadmap which they hope to propagate to their clients and the wider hydrocarbon industry.

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