Houston—The energy transition took off in a big way just as the coronavirus pandemic was overtaking the globe in 2020, but fossil fuels are still seen growing at least through the 2030s even as renewables usage rises in popularity and affordability, panelists at the annual CERAWeek by IHS Markit conference said March 1.
But for the next 20 years, upstream producers will need to sharpen their skills, revise their portfolios and position themselves for changes ahead, becoming more efficient, fiscally disciplined and focusing investments on where they are most competent and advantaged, representatives from large international oil companies said."We recognize there's a finite demand for oil and gas and that we have to make returns for shareholders," Al Cook, executive vice president of development and production-international for Norway's state-run Equinor, said. "But we believe there will be growing levels of oil and gas demand and a real need for hydrocarbons in the 2020s through the 2030s."
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Equinor has pared back in some areas, focusing on "narrowing" its portfolio as far as the number of countries and plays it operates in. For example, it has exited most of its operated onshore US operations, but deepened it in key core areas such as offshore regions, including Brazil, UK North Sea and the Gulf of Mexico, Cook said.
"This is about focusing our operating capabilities where we believe we're the best in the world," he said.
Colombia, which holds regular licensing rounds to invite investment in its upstream sector, has recently undertaken what National Hydrocarbons Agency president Jose Armando Zamora called a "full review of our contract offering for bidding rounds," building on its attractiveness to investors.
Colombia boosts investment pace"We want to boost the pace of investment for these opportunities and are testing them in Colombia's Round 2021," which will be launched in a couple of months, Zamora said.
"[The world] will still rely on fossil fuels for the next three or four decades," he said. "So we see a window of opportunity [where we] to take advantage of this potential. Otherwise our endowment will remain underground forever and society won't benefit."
Cleaning house, in several respects, is a key part of how Nigeria's national oil company is preparing for its future, Adokiye Tombomieye, chief operating officer for the Nigerian National Petroleum Corporation, said.
"We at NNPC are trying to reduce our costs," through a cost optimization program, Tombomieye said.
Moreover, the agency has made an effort to promote transparency, which, in turn, will provide efficiency and competitiveness as it proceeds through the energy transition, he added.
Nigeria in years past grappled with corruption, and the US Department of Justice at one time charged various oilfield service company representatives with offering bribes to officials in that country to smooth business transactions.
Meanwhile, John Hess, CEO of US Bakken Shale producer Hess Corp, which also has a growing operation in Guyana, said during a separate panel that a "huge" investment challenge lies ahead of the industry to grow oil and gas supplies and keep ahead of the demand for hydrocarbons.
"The International Energy Agency is clear that the world needs to invest $500 billion-$600 billion a year to grow global oil and gas to keep up with demand growth in the future," he said. "The number spent last year was $300 billion, and in the last five years, $300 billion to $450 billion."
Moreover, if total spending has been below needs, exploration spending especially has lagged requirements in recent years, he added.
V-shaped demand recovery"We're in a V-shaped recovery for demand, and a U-shaped recovery for supply," John Hess said. "[But] once inventories are drawn down and we get rid of the glut, we'll need more supply and stronger prices to encourage that investment."
"We see demand growing for the next 10 years," he added.
Maynard Holt, CEO of energy investment bank Tudor, Pickering, Holt, noted that with WTI prices recently above $60/b and Brent a few dollars above that, the market is recovering. And there is a "lot of capital" available to try new things in the energy space, he said.
"I think the sector is going to get a new look, particularly as global oil and gas markets tighten, and show [increasing capital] discipline, and improve in emissions," he said. "The long-term picture is that the world is growing, and it will need oil and gas ... I think it will surprise us how old dogs might learn new tricks in the next five years."
