Geopolitical disruption has boosted hydrocarbon demand, but energy companies must continue to pursue an energy transition if they want to survive, says GlobalData’s new report, ‘Thematic Research: Energy Transition in Oil & Gas ‘.

A move away from fossil fuels was within reach

As yet, almost no nations, not even the richest, are able to do away with their reliance on fossil fuels entirely. Some had such a situation on the horizon a year or two ago, but Russia invading Ukraine interfered with and delayed those ambitions. Policymakers have deprioritised sustainability in favour of energy security, which rejuvenated demand and the fossil fuel market. Energy companies were brought massive profits (not without attendant public chagrin, but profits nonetheless) from fossil fuels of the sort they may not have expected to see again. But the long-term outlook has not changed – a reliance on fossil fuels for profits is not sustainable, either environmentally or financially.

Once geopolitical volatility subsides, oil and gas companies will feel international pressure once again, this time perhaps with redoubled force. Scrutiny upon energy transition programmes will resume.

The road to energy transition

Leading oil and gas players are taking a variety of routes in their energy transition journey. Many have already committed to carbon neutrality targets. New focuses of investment strategies include carbon capture and storage (CCS), hydrogen production, renewable power generation, electric vehicles (EV), energy storage, and other low-carbon fuels.

The first stage of the energy transition involves fuels such as natural gas, liquefied natural gas and blue hydrogen, which act as transition fuels. The use of transition fuels is gaining momentum as they provide a way of ensuring energy security for the short term while fulfilling energy transition commitments over a longer time. Dependency on transition fuels will persist until cleaner energy fuels are deployed and become more economically reliable. Heavy industries, such as petrochemicals, steel and cement, are expected to rely on transition fuels before adopting cleaner fuels.

Zero carbon technologies in the power sector

Zero-carbon technologies include renewables (renewable power and renewable fuels), green hydrogen, nuclear energy and energy storage methods. The ultimate goal of energy transition efforts is to fully incorporate zero-carbon technologies into energy production and consumption requirements.

Zero-carbon technologies are being predominantly adopted in the power sector. The scope for newer technologies, such as green hydrogen, is increasing year-on-year, whereas other technologies, such as renewables and nuclear, have been used by the power sector for a longer duration. The industry is working to incorporate green hydrogen technology into its infrastructure to supplement the power requirements of its customers.