Oil and gas in an energy world of rivalries

Dr. Atul Arya, Senior Vice President of Energy at IHS Markit, talks about the various changes the energy industry is experiencing – which will also be one of the key issues discussed at the 38th CERAWeek, the industry’s leading annual conference held in Houston, Texas, this week.

 

By Roman Elsener

Dr. Arya, the 38th CERAWeek is under way. What are you looking forward to most at this year’s conference?

 

The energy industry is going through big changes, but different areas are changing at different speeds. I am really looking forward to hearing how companies are getting ready to deal with this.

In my opinion, the transition will be an evolution, not a revolution.

For example, if you read the news, you would think that we’re all driving electric vehicles by now. There is a lot of enthusiasm and big expectations, but EV adoption is progressing slowly: The total number of electric cars in the world is still miniscule. Rapid growth in photovoltaic power over the last decade provides a sharp contrast. Working in that industry in the early 2000s, I never thought we would be where we are now, in terms of cost reduction and the level of PV deployment around the world. Solar power is still very small in the global energy mix, but how much it has grown in just the last five years is unbelievable. So, although there are exceptions, the transition of the energy system will take time. 

Oil, shale gas, and renewables: What is the right fuel balance?

 

The world will need all types of energy. It will depend on resources available locally and what is most attractive economically. For example, the North American shale revolution has changed the energy system dramatically. The US oil production has almost tripled in the last decade to over 12 million barrels. This is equal to adding a new Iraq and a new Kuwait to global oil supply in ten years!

But the amount of money going into shale has a big impact on the long-cycle investments. The more companies invest in the short shale cycle because of faster returns, the less money will be going in long-cycle projects like deep-water offshore projects. And with so much pressure on companies to invest in renewables and other zero-carbon technologies, the question arises: Will there be enough investments in oil and gas resources that the world will need for the foreseeable future?

The main theme of this year’s CERAWeek is “New World of Rivalries.” What does this topic mean to you personally?

 

Thinking about the theme initially, we had the rivalries among fuels in mind. But looking at the theme more broadly, we realized that there are many new geopolitical rivalries, too. What is going to happen in the relationship between Iran and the USA? How is the situation in Venezuela going to develop? And will China and the USA resolve their tensions in trade?

A third dimension of rivalries is that in the technology field: Digital technologies are coming to the energy sector, and they are disrupting the business models. This is a mature industry that has been around for a long time, and now here are a new set of players, who don’t know much about energy per se, but are working hard to disrupt the business. 

Oil experts are deeply divided in their views on the future of what is still the world’s key commodity. What is your take on this?

 

I don’t think we will wake up five or ten years from now and find out that there is no need for oil. But it will get more specialized in use. Oil will remain a fuel of choice for heavy-duty transportation like shipping or aviation, but it will likely lose shares for lighter vehicles like cars and buses.

People talk of oil demand “peaking” at one point in the future, but I think “peak” is a poor choice of a word. Most likely we will reach a plateau and stay there for several years before we see a decline in demand. Even when that happens, we will continue to need oil. Getting to zero oil demand is not in anybody’s forecast for this century.

The date for reaching said plateau is uncertain. We have seen forecasts setting it in the late 2020s to the mid-2030s. My own feeling is that once we hit the plateau, we’re going to stay there for several years. 

What role has a large global company like Siemens to play in the future energy market?

 

I think it is important for the public to understand how the system works, what it takes to change it and the role of technology. For example, one of the big concerns is the impact of automation and digitalization on jobs. Siemens can play an important role in getting out the facts. As a technology leader, Siemens has great opportunities to continue to invest in the energy transition and come up with new solutions – because the world is going to need them. 

Atul Arya is Chief Energy Strategist at IHS Markit and responsible for integrating energy content, analysis and insights across the entire value chain. With over 30 years of experience in the energy industry, his international career spans a wide array of energy expertise from strategy development and business planning to field operations and technology commercialization. His experience includes leadership in solar energy development as well as in the oil and gas sector. He holds a

doctorate in engineering.

2019-03-11

Roman Elsener, based in New York, reports on political and economic news.

Picture credits: IHS Markit

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