It’s been quite a whirlwind of week here at CERAWeek 2019. There were far more choices on what sessions to attend than ever before. For those with the fortitude to make it all the way to Friday, it’s one of my favorite days. It opens with a panel of the IHS Markit senior analysts sharing their perspectives from the week. I’ll try to capture a few of the key points I hear.
Atul Arya moderated the panel and panelists included James Burkhard, Susan Farrell, Shankari Srinivasan, Raoul LeBlanc and Jone-Lin Wang.
Jim opened recalling U.S. Secretary of State Pompeo speech with an unapologetic tone on the use of U.S. energy abundance and their exports to pursue policy aims.
Susan highlighted three themes—the acceleration of technology, energy companies addressing climate change, and the focus from senior leaders on the need for diversity and inclusion. For climate change there was a lot of discussion around reducing methane emissions and carbon capture and storage initiatives.
Shankari described the large investments going on in the global gas markets, especially in the LNG sector. The demand side has been increasing. The business model and financing of LNG plants is evolving with less long-term contracts and selling through gas aggregators.
Jone-Lin described the advancements in smart power grid technology to better manage both the supply and demand side of electrical power grids. She highlighted Emerson’s Bob Yeager as describing how digital twin technology is transforming power generation by allowing optimization activities to occur in safe, simulated environment before moving it over to the online plant.
Atul spoke about the upstream oil & gas and how the role of technology is making a fundamental change in digital transformation of the companies. This includes not only automation providers like Emerson, but cloud providers like Microsoft Azure and Amazon Web Services.
Oil prices just hit a new high price for the year today. Jim noted that the shift of marine vessels to cleaner burning fuels with lower sulfur content will cause increase demand for the refiners to process lower sulfur crude but also reduce demand for the traditional heavier processed hydrocarbons. There is also a shift from oil to natural gas as some vessels convert to LNG.
Shankari noted about the increasing supply of renewables as part of electrical power grids with gas acting as a smoothing function to handle the intermittent supply and maintain grid frequency. The challenge is more maintaining the frequency than the megawatts supplied to the grid. The states with the U.S. have very different regulatory environments with California and Texas at the extremes.
Jone-Lin highlighted the rise of offshore wind is growing rapidly. The renewable energy wave started with wind energy, moved to solar energy, and has now shifted back due to offshore wind.
Susan noted discussions around carbon taxes affecting the behaviors of energy companies. There is a lot of resistance from people within countries about the costs they impose on their consumption of energy. Susan believes we are in more than an energy transition—that we are in an energy transformation. As the next generation has entered the workforce and are customers to the energy companies and demanding more decarbonization efforts.
The world has become more complex where oil used to be for transportation, but now there are more choices such as electric vehicles and natural gas fueled ones.
Raoul noted that energy from shale has been the fastest growing source of energy in the world. The industry has changed from finding where energy can be extracted to now knowing where the good shale areas are at, but how to extract the energy more efficiently and profitably. One of the challenges is well interference, where nearby wells can impact production rates. It’s forcing the producers to be more experienced in where and how they drill and hydraulic fracture the formations.
There has been a gigantic increase in U.S. unconventional supply of oil and gas, and Raoul mentioned that this level of growth is slowing merely to huge. There has also been a shift from small and midsize companies involved in unconventional exploration and production to the larger oil & gas companies like ExxonMobil and Chevron.
Shale is considered as short-term production, with other areas like offshore deep-water production with large reservoirs for long-term production.
Electric vehicles (EVs) have had dramatic growth (64% in U.S. and more than 50% worldwide) but are still a tiny part of the transportation market—0.3%. Significant infrastructure investments would have to made as more EVs get plugged into the grid for recharging.
Atul noted that some areas like air travel and container ships will be very difficult to decarbonize where the power industry can shift more easily as storage technologies continue to advance.
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