Chevron – CERAWEEK: 2021 conference highlights oil’s greener turn, pandemic’s lasting impact
The 2021 CERAWeek by IHS Markit conference, arguably the premier fossil fuels forum, may have been the most unique of its nearly 40-year history and this year highlighted that the march by an “old-economy” industry into the energy transition has revved up and is gaining momentum.
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The annual event, spanning the week of March 1, was the first virtual CERAWeek and the first in two years after the 2020 conference was cancelled on coronavirus concerns eight days before its scheduled start date. Over 19,000 delegates registered, three times previous attendance levels.
And while climate change had been a subject at CERAWeek for years, energy transition dominated most 2021 sessions, even those specifically keyed to oil and gas. Indeed, the conference’s theme “The New Map: Energy, Environment and Charting the Future” recognized the industry’s acceleration during the past year in environmental priorities and the drive toward decarbonization and net-zero goals.
High on hydrogen
Saudi Aramco, which has said it aims to create a world-scale hydrogen business by 2030, in September made its first-ever blue ammonia shipment, which headed to Japan for use in power generation.
CEO Amin Nasser said at CERAWeek that Aramco prefers blue hydrogen, derived from gas, over green hydrogen because of costs and its natural gas supply. Blue hydrogen is currently two to three times cheaper than green hydrogen at $5/kg to $6/kg, but he noted costs for both should decline in the future.
“We are looking at a lot of projects to capitalize on our gas resources,” Nasser said. “We are looking at markets because you are looking at huge quantities of hydrogen that need a customer base around the world.”
The oil industry’s new look at carbon capture technology was another trend talked about at CERAWeek.
Howard Herzog, senior research engineer for the Massachusetts Institute of Technology Energy Initiative, said the pace of carbon capture technology development will largely be determined by governments and the investment community, as those entities can forge everything needed from government-backed financial incentives to proper regulatory frameworks to thousands of miles of CO2 pipelines.
However, Herzog noted more governmental incentives have focused on encouraging renewable energy production and less on CCUS.
“We’re going to see a lot more storage than utilization,” Herzog said. “Once we go further down the pathway, utilization may get more interesting.”
Chevron is among the oil giants looking to reduce its carbon output. Steve Green, president of Chevron North America Exploration and Production, said that while oil and gas will remain a “viable component of the energy mix” as alternative forms of energy grow, the company is looking at lowering the “carbon intensity from energy we use, to produce energy that the world uses to power its economy.”
Green noted Chevron last year brought online a solar facility used to generate power to produce steam for production of its California heavy oil, and the company has signed a joint venture deal to supply renewable sources to power operations in the Permian Basin.
“We’re constantly looking at to how to lower our carbon footprint,” Green said.
CEO Mike Wirth also talked about Chevron’s production of renewable natural gas in concert with dairy farmers in California under its Waste to Wheels program.
“In California, under the Low Carbon Fuel Standard there are tremendous incentives to do so,” Wirth said. “Our goal is higher returns and lower carbon. I think this will be a growing part of our business.”
Wirth also touched on another emerging trend of the implementation of new technologies, which he called one of the positive lasting impacts the pandemic will have on the industry.
“There’s been a great acceleration of technology that had begun to be available to our business, but there was perhaps a bit of reluctance to see them accelerate into use, and now we had no choice,” Wirth said.
Wirth said Chevron now has operators conducting directional drilling from their homes, when just a couple of years ago a person would have to man a rig and control a drill bit to complete the task.
The company is also using augmented reality.
“Instead of flying subject-matter experts out to offshore platforms, with headsets and integrated technology an expert halfway around the world can troubleshoot problems that previously we would send people out physically to deal with,” Wirth said. “We’ve done remote inspections and audits using drones now.”
Aparna Raman, president of reservoir performance for Schlumberger, talked at the conference on the growing importance of data. Raman said the future of exploration probably won’t be a lone rig drilling off the coast of Northwest Africa, but increasingly it will be data scientists and engineers exploring within terabytes of data and technology developments.
“Your producing well is an asset not only from production from data point of view, but it gives you early indications about drilling and completion, and production and exploration data to form the basis of future discoveries,” Raman said. “De-risking the discovery process and speeding up cycle times, which in the past could be six to 10 years for deepwater, and getting cycle times down to about two years is especially critical to our sector for upstream to remain competitive, especially for offshore and remotes.”
The pandemic’s impact on global demand was historic but recovery is being seen as coronavirus immunizations grow, which brought some enthusiasm about the year ahead to the virtual conference.
Abu Dhabi National Oil Co. CEO Sultan al-Jaber at CERAWeek estimated current global consumption of oil is hovering around 94 million-95 million b/d and expressed optimism the economic recovery in China, India and the US could normalize demand even sooner than expected.
“We expect [oil consumption] to rise to above pre-COVID levels by the end of this year,” he said.
Aaron Brady, senior director of energy for IHS Markit, said by midyear the world will likely hit critical mass in inoculations, leading to a surge in oil demand and a general increase in economic activity.
“We think from first quarter to third quarter oil demand globally could increase 5 million b/d to 6 million b/d, but that still doesn’t get us back to pre-pandemic levels,” Brady said. “It has to keep pace with demand growth or prices will keep rising.”
Even with oil demand and prices rising, producers will still stick to plans for this year and “maybe” for 2022, said Raoul LeBlanc, vice president of North American unconventionals for IHS Markit, but there is a “point at which the temptation becomes too strong.”
“Beyond , it’s really difficult for them to resist the temptation,” LeBlanc said. “I believe that at any given price, growth will be less than in years past, but if you start getting into the numbers proponents are mooting like $70/b or $75/b oil, you can both return an enormous amount of money to shareholders and have very strong growth, [although] those two things don’t go together in any kind of demand world we’re talking about.”