The “deep pockets” of the oil and gas (O&G) industry could be crucial in accelerating the deployment of renewables, the IEA has said in a new report.
The Oil and Gas Industry in Energy Transitions report, produced in cooperation with the World Economic Forum, outlines how the industry can adapt to the clean energy transition.
There are “ample” opportunities to reduce emissions, including integrating renewables and low-carbon electricity into new upstream and LNG developments, it suggests.
O&G companies have made several moves into the UK’s clean energy and technology space in recent years. BP acquired Chargemaster and purchased a stake in Lightsource, whilst Shell snapped up battery storage firm sonnen and energy tech firm Limejump.
However, the average investment in non-core areas globally by O&G firms is limited to around 1% of total capital spending, the IEA said.
The largest outlays of this are solar PV and wind, although some companies have diversified by acquiring existing non-core businesses in electricity distribution, electric vehicle charging and batteries, for example. However, there are “few signs of the large-scale change in capital allocation needed to put the world on a more sustainable path”.
Funding for renewable projects is going to need a boost to meet global goals. Annual green energy funding must more than double by 2030, according to recent estimates made by the International Renewable Energy Agency.
The “extensive know-how and deep pockets” of O&G companies can play a “crucial role” in accelerating the deployment of key renewables such as offshore wind, Fatih Birol, executive director of the IEA, said.
“No energy company will be unaffected by clean energy transitions,” Birol continued. “Every part of the industry needs to consider how to respond. Doing nothing is simply not an option.”
O&G companies can also have a hand in supporting the development of technologies such as carbon capture storage and utilisation (CCUS), as well as low-carbon hydrogen and biofuels.
Scaling up of these technologies and bringing down their costs will rely on large-scale engineering and project management capabilities, the IEA said – capabilities that O&G firms, with experience of large infrastructure projects, have. They will therefore be “critical” for some key capital-intensive clean energy technologies to reach maturity.
“Without the industry’s input, these technologies may simply not achieve the scale needed for them to move the dial on emissions,” Birol said.
Research and testing of CCUS is underway in the UK. A energy research centre with facilities for commercial-scale testing of carbon capture, alongside other technologies such as bioenergy and smart grids, was announced in July.
A series of government funding for CCUS projects has also been promised, including £26 million, part of which was allocated to the UK’s first industrial-scale CCUS demonstration plant.