The US administration’s withdrawal from the Paris Agreement on climate change does not eliminate the urgency of addressing existential issues for the oil and gas industry, both in the US or globally. At the center lie two questions: 1) Should the industry take a pro or con position regarding the Paris Accord or remain neutral? 2) What strategies are critical to maintain the oil and gas industry’s preeminence in the global energy markets? There is a brave new world of energy with three defining attributes: unitization, environmentalization, and extreme efficiency. Understanding these three will help answer both questions.
Unitization is the emergence of a common energy language—kilowatts, BTUs, or calories—to shop among different brands/sources of energy such as oil, gas, wind, solar, or others. To consumers worldwide, it matters little whether the cars they are driving or the planes they are flying in are fueled by shale oil or hydrogen so long as the economics are right and the fuel of choice meets prevailing public norms of “environmental wellness.” The latter is an imperative, not an option, in this new age.
Integration of environmental wellness into corporate and government actions constitutes the essence of “environmentalization.” It is not meant to be synonymous with global warming. It is the sum total of influences on all aspects of the environment. The air quality of Chengdu, China, or fracturing-induced tremors in Oklahoma must be part of this conversation. What ties everything together for consumers worldwide is the ability to choose the most efficiently delivered kilowatts—environmentally and economically—hence the imperative for “extreme efficiency.”
Extreme efficiency is the new paradigm of energy markets for fossil fuels and renewables alike. A closer look at seemingly unrelated fronts is worth noting. In the Permian Basin of Texas, the bedrock of the US oil production’s resurgence, crude output levels reached 2.6 million B/D in October 2017 despite a 50% drop in crude prices over the past 3 years. During the same period, US solar energy power generation more than tripled while unit costs dropped 33%. Similar trends in efficiency are evident in wind and unconventional gas. More importantly, CO2 emissions in the US and European Union have come down 20% during the past decade accompanied by comparable drops in energy intensity (consumption per GDP) while China started a downturn trend in CO2 emissions in 2013. More is on the way.
The industry needs to take a proactive and solution-centric position vis-à-vis the Paris Agreement. The latter provides a facilitating, albeit imperfect, platform to strive toward modest climate goals—to keep global temperatures from rising more than 2°C by the end of the century. Staying with it would have been the wiser choice for the US given its prominent position in world affairs and its enormous capacity for innovation, even more so when supported by the right policies and realistic goals. It is in these two areas where the oil and gas industry can and should contribute to the Paris Accord.
Public perceptions matter. Today, some of the growing appeal of electric cars stems from the idea that they are fueled by renewable sources when in fact fossil fuels and nuclear make up 85% of the energy supplies powering electric grids nationwide. Also as a matter of background, and well-documented by scientific evidence, a major global warming event took place roughly around 6000 BC at a time when the human population on the planet was estimated to be fewer than 10 million with virtually zero CO2 emissions compared with the post-industrial age. Yet the consequences were far-reaching—the rising of sea levels in the Atlantic and the Mediterranean, the separation of the British Isles from the European continent, creation of the Bosphorus Strait, and the multifold expansion of the Black Sea. The point here is that nonhuman factors have and will continue to have an impact on global climate events with or without the Paris Accord. Hence, any debate on global warming must acknowledge the inherent multidimensionality of the challenge beyond fossil fuels. Oil and gas must proactively lead efforts toward environmentalization and extreme efficiency through automation, robotics, and artificial intelligence. This in essence provides the answer to the question about what strategies the industry should pursue to maintain oil and gas industry’s prominence in the 21st century.
Slashing the CO2 footprint of fossil fuels through carbon capture and sequestration should become a top priority for our industry. Can we reduce net CO2 emissions by 75% per BOE consumed by 2050? In my view, this should be our industry’s audacious goal. All kilowatts are not equal and the markets will increasingly favor emission-light energy supplies. The best way forward for the oil and gas industry is to join the battle for clean and affordable kilowatts with an intention to win. Michelangelo’s saying, “The more the marble wastes, the more the statue grows” is most fitting. Hard effort indeed, but the legacy we will leave behind depends on it.
As the former head of reservoir management for Saudi Aramco for nearly a decade, Saleri led efforts in introducing best-in-class programs in waterflooding and maximum reservoir contact wells, most notably in Ghawar. Prior to that, he worked for Chevron for 18 years. He was cited among the industry’s game changers in the book titled, Groundbreakers—The Story of Oilfield Technology and the People Who Made it Happen by Mark Mau and Henry Edmundson (2015).
Saleri received a BSc in chemical engineering from Bosphorus University, and MSc and PhD degrees in chemical engineering from the University of Virginia.