The Future of the Oil and Gas Industry

2020 was a tough year for virtually every sector of the global economy, but for the oil and gas industry, times were particularly rough.

In the earliest days of the COVID-19 pandemic, movement restrictions and lockdowns forced people to curtail all forms of travel in an effort to contain the spread of the virus. Air, sea and road travel had ground to a halt by mid-March, virtually halting fuel consumption in the process. Although signs of a recovery could be seen during the summer, stock prices across the board remained depressed.

Now we’re more than halfway through 2021 and the harshest of the restrictions have lifted, the oil and gas industry is enjoying something of a rebound: Oil stocks had gained 40% by the end of February 2021, even whilst many renewables were entering into a slump, leading many experts to forecast bright times for both oil and gas, despite the relentless march towards a zero-carbon future.

But how can the good fortunes of both oil and gas continue? Surely with all the talk of “Building Back Better” and the continued push towards “Clean Energy” and the “Zero Carbon Transition”, the days of oil and natural gas are numbered?

As with most complex topics, the answers aren’t always as clear cut as they seem. In this article, we’re going to take a look at how the oil and gas industry is adapting and evolving to meet the challenges posed by renewables, as well as exploring how these energy sources might fit into a low carbon economy:

Keeping up With the Times

To the general public, the oil and gas industry is largely viewed as old-fashioned, dirty and slow to implement change.

There’s no denying that these industries have enjoyed a high-demand status that has largely kept them focused on production growth and the exploration of fresh reserves. However, fossil fuel industries are beginning to catch up with their largely automated counterparts in manufacturing and retail, embracing plenty of new technology to both clean up their products, and realize greater yields from the raw materials they extract.

Let’s explore some of those advances:

The Digital Oil and Gas Industry

Cloud technology, AI and improved data acquisition has revolutionized everything from supermarket profit margins, retail supply chains and farming yields. It therefore comes as little surprise that the oil and gas industry is embracing similar technology.

A digitized oil or gas field is all about monitoring and analytics: Data can be collected in real-time and then analyzed to improve yields, leading to a more efficient, sustainable product.

McKinsey and Company, a consultancy firm who improve the efficiency of oil and gas organizations, recently noted:

“Offshore platforms are, on average, running at only 77% of maximum production potential. Rigorous use of analytics can improve substantially on that.”

Artificial Intelligence

Artificial intelligence (AI), is now commonplace across hundreds of industries. It’s used to manage and predict stock levels, crunch the numbers on large volumes of complex data, and even to monitor and control machinery and robotic equipment.

These are AI tasks that could benefit the oil and gas industry immensely, and we’re beginning to see a rapid take-up of AI across the board, even helping with the mapping and exploration of tricky-to-access oil and gas deposits.

Blockchain

These days, everyone is familiar with Bitcoin, the popular digital currency. However, few people understand the role that Blockchain technology (the engine that powers Bitcoin) is increasingly playing in our supply infrastructure:

Blockchain allows us to securely store transactions and data directly onto devices. That doesn’t sound like a big deal at first, until you imagine a system where oil or gas could be tracked right from drilling or barrel, through the entire product life cycle and even into accounts, transactions and stock predictions - Allowing for greater transparency and efficiency across the entire supply chain.

Renewable Energy Sources and Carbon Capture

Few people realize that the oil and gas industry has utilized carbon-capture technology for decades - Major oil pumping facilities already use waste CO2 to pump higher volumes of oil and gas than would otherwise be possible - But recently the industry as a whole has begun to make the shift to a lower-carbon output, purely for environmental reasons.

It seems counterintuitive at first, but as more efficient and extensive renewable power sources come online, the oil and gas industry will increasingly make the switch to lower carbon options.

Just because the oil and gas industry produces fossil fuels, there’s no reason it can’t power production facilities using renewables. We’ll be relying on oil (petroleum) derived plastics for many years to come, so it makes sense to explore alternative ways of powering production facilities.

British oil giant BP has already begun investing in renewable energy, and is on target to hit over $5 billion per year by 2030.

Repurposing Existing Infrastructure

Did you know that in Germany alone there are more than 470,000 kilometers of gas supply pipes?

As engineers and scientists explore new methods for decreasing our reliance on fossil fuels, many are coming to the conclusion that one of the most efficient solutions could be to utilize the existing energy grid to transport renewable power - In this case, we’re talking about hydrogen.

The Case for Hydrogen Energy

Hydrogen (when produced using green electricity) is a zero carbon fuel. When hydrogen reacts with air to produce heat, the byproduct is pure water. Piped hydrogen has more than 10 times the efficiency of an electric power line, but is up to 14 times cheaper to maintain. There are some technical difficulties to overcome during conversion, but existing natural gas pipework does seem like a prime candidate for conversion to clean hydrogen power.

Surely This Would Devastate the Natural Gas Industry?

We’re decades away from a 100% hydrogen pipe network, but the great thing about utilizing the existing natural gas pipework is that it allows for “blended mixes” of hydrogen with regular natural gas.

Keele University in the UK has already conducted trials in a domestic setting using regular natural gas mixed with 20% hydrogen. The tests are looking promising, allowing the public to continue using their existing gas appliances without a compromise to safety or effectiveness.

Adding 20% hydrogen into the gas grid could allow the gas industry to continue functioning, whilst cutting up to 6 million tonnes of CO2 every year - that’s about the same as the exhaust gases from 2.5 million cars.