Opinions

A new year; a new energy reality

By Gordon Ballard, IOGP Executive Director

Gordon Ballard, IOGP Executive Director
Gordon Ballard, IOGP Executive Director

The weeks that span the end of the old year and the beginning of the new are a good time to reflect on what has happened and what is likely to happen.

As far as the future of the upstream oil and gas industry is concerned, December 2018 certainly provided food for thought – and a good indication of what could be ahead for our industry.

One of the most widely-publicized year-end events was the global conference on climate change, COP24.   It took place in the coal capital of Poland, Katowice, and for the first time, IOGP attended in an official capacity.   It gave us an opportunity to explain to fellow-participants that our industry offers solutions to climate change challenges.  These include, gas as a cleaner-burning fuel (and major source of hydrogen) as well as expertise in carbon capture, utilization and storage (CCUS).

Our Association was also represented by a delegation from GasNaturally, a European body of which IOGP is a founder member.

Offering solutions

While neither IOGP nor GasNaturally were involved in any official negotiations at COP24, both organizations were active in the plethora of side events.

At the EU Pavilion, GasNaturally organized panel discussions on:

  • Addressing climate change through the growing use of gas and other energy carriers
  • Innovations in emissions mitigation to achieve a sustainable future
  • Millennials’ and their views on addressing climate change

As the host country’s leading energy company, IOGP member PGNiG held events of its own in the Polish Pavilion.  Among the discussions was a panel looking at the use of natural gas to improve air quality.  Another focused on reducing methane emissions.  The moderator was Scott Foster, Director of the Sustainable Energy Division in the United Nations Economic Commission for Europe.  He said that “Natural gas can make important contributions to a sustainable future in the areas of mobility, power generation, improving urban air quality and providing quality energy access in unserved areas” – but only by addressing both methane losses and CO2 emissions.  “Placing a real price on emissions and trusting in markets would be key steps.”

IOGP’s representative on that panel reminded the audience that, according to the latest International Energy Agency (IEA) figures, global demand for gas will continue to rise to 45% by 2040.  On balance, he said, gas has many more advantages than disadvantages as a fuel to help achieve a lower carbon emissions economy with energy security.  Some 40 countries now have the capacity to import LNG and shale extraction is also growing – not only in the US but in other areas as well, such as Argentina and China.

More widely, he emphasized that every country is undergoing its own energy transformation to meet COP goals.  “Each transformation is different, depending on the country’s starting point and its chosen method of implementation.  What we are really talking about is a series of energy transitions” he said, as put forward in the recent G20 meeting in Buenos Aires.

Growing demand

One factor that is virtually universal, however, is growing demand for oil and gas.   This was highlighted in another year-end event – the publication of IOGP’s second Global Production Report, second edition.

Based on comprehensive data provided by BP, the IOGP publication shows that in 2017, oil and gas demand rose or reached all-time highs in most regions of the world.  Putting that in perspective against production levels, the report also indicates the level at which a region can meet its own oil or gas demand.   An IOGP Production Indicator© (PI) higher than 100% means that a region produces more than it needs and so can export at least part of its production.

Production
indicator
AfricaCISMiddle
East
Central &
South America
North
America
EuropeAsia
Pacific
Oil200%334%340%106%83%23%23%
Gas159%142%123%103%101%45%79%

There are sound reasons behind the growing demand for oil and gas.  They are plentiful, accessible, cost-effective and – especially in the case of natural gas – cleaner-burning.  That is why oil and gas currently meet half of the world’s energy needs and will continue to do so for decades to come, according to the IEA’s most likely scenario for the world’s energy future.

Our industry needs to invest to keep up with rising demand, but there is also another challenge:  field depletion.  Historically oil and gas fields outside OPEC have depleted by about 6% per year.   Average OPEC field depletion is generally lower at 2% annually.

Investments in enhanced recovery in depleting fields and the discovery and development of new fields can keep such production losses at bay.  Equally important is the need to work with policy-makers to mobilize the resources needed to meet growing long-term demand.

You can access the IOGP Global Production Report at the IOGP bookstore.


About Gordon Ballard

Prior to joining IOGP, Gordon spent 30 years working with oilfield services company, Schlumberger, on four continents.  He became Schlumberger’s UK Chair in 2005.  He has also served as Chair of the UK’s Oil and Gas Industry Council and of OPITO International, the upstream oil & gas skills organization, and was Co-Chair of industry trade association Oil & Gas UK.

Gordon graduated from the University of Glasgow with a B.SC. Hons in Civil Engineering and holds a Masters in Petroleum Engineering from Heriot-Watt University.

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