CREDIT: SHUTTERSTOCK
ENERGY UPDATE
MOVING ENERGY PARTS High Uncertainty as Oil, Gas Industry Transitions |
BY NEERAJ NANDURDIKAR
he oil and gas industry is in a state of transition. Within the last year, many of the industry’s leaders have unveiled ambitious plans to significantly reduce greenhouse gas, or GHGs, emissions – particularly CO2 and methane – from their energy activities. As in many facets of business and life these days, however, the oil and gas industry is gripped by uncertainty about the direction the energy transition is headed. It remains too early to tell which of the most promising sustainable energy transition models – biofuels based or natural-gas centric or wind and solar power centric – will gain traction in the industrial, transportation, residential and commercial sectors. Uncertainly is never a friend of business, but lower oil prices and changes in energy demand – as well as carbon pricing and government policies, particularly at some local and regional levels – are pushing the industry to accelerate its shift to sustainable energy. The
It means project shipping demand changes are coming in fast, if they have not already arrived. Even though many oil and gas companies are enduring significant cuts to their capital expenditure accounts, these same companies, in addition to diverting significant amounts of capital for the development of cleaner energy generation systems, are deploying carbon capture, utilization, and storage, or CCUS, technologies. An uptick in the construction of CCUS projects can be expected over the next few years. These projects are known to entail movement of large kits necessitating the breakbulk and cargo transport services that the oil and gas sector has needed in the past. Still, peering through the fog of uncertainty the oil and gas industry finds itself in, it is possible to discern some important features of the ongoing energy transition. Shipping leaders should consider how the following trends and observations could alter the breakbulk cargo market.
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32 BREAKBULK MAGAZINE www.breakbulk.com
Covid-19 pandemic, having reduced fossil fuels demand over the last several months, has actually sped up sustainability initiatives. To sustain themselves throughout this transition, oil and gas companies are rebalancing their capital projects portfolios, prioritizing cleaner and GHG mitigation opportunities over their traditional revenue generating asset development opportunities. This is a tricky balance, as those traditional projects are often the source of large cash flows that fund the new energy projects. Some companies have been looking to create synergies between their upstream and downstream petrochemicals businesses to streamline their organizations and operations. Other companies, meanwhile, have scaled back or divested their downstream businesses altogether to concentrate on shaping the evolving energy sector. What does this all mean for project cargo and breakbulk industry leaders?
ISSUE 6 / 2020
