Should There Be More Investment In Hydrocarbons?

Just a few days after nearly 200 leaders pledged to ramp up efforts against climate change and announce their plans to transition to green fuel, energy ministers of the developing world’s oil producing nations called for greater inclusivity and continued investment in hydrocarbons for energy security. This, as they work to reduce emissions while developing oil reliant economies.

Speaking at the Abu Dhabi International Petroleum Exhibition Conference, UAE’s Energy Minister said that the world cannot just unplug from the use of hydrocarbons and that the oil and gas industry needed to invest over $600 billion annually until 2030 just to meet the expected demand.

“The global community has just concluded COP26 and on balance, it was indeed a success yet current energy dynamics have revealed a basic dilemma. While the world has agreed to accelerate the energy transition, it is still heavily reliant on oil and gas. If we are to successfully transition to the energy system of tomorrow, we cannot simply unplug from the energy system of today, we cannot just flip a switch. We must of course prioritize investments towards the most cost and carbon efficient barriers,” said UAE Energy Minister Suhail al-Mazrouei.

The United Nations climate summit also known as the COP26 ended on Saturday (13 Nov) and was the first time when leaders from across the world agreed that fossil fuels were the key driver of global warming.

The Energy Minister of Saudi Arabia, the top oil exporter, said the approach to climate change should provide equal focus on energy security and economic growth in developing countries.

“On the idea that in order for everybody to be inclusive, you have to look at first, emissions not resource, two, it must be all greenhouse gases in all sectors. If we are to be inclusive, we have to be mindful of national circumstances and we have to be also mindful of the fact that things are not even, there are category of less developed countries,” said Saudi Energy Minister Prince Abdulaziz bin Salman.

Hydrocarbons are naturally occurring chemical compounds that consist of hydrogen and carbon found in crude oil, natural gas, and coal. They have been manipulated by humans to be used as an energy source, such as gasoline and jet fuel. The use of hydrocarbons, particularly their burning, such as in coal, has had a devastating impact on the environment. As a result, many alternative energy sources that are safer and cleaner have been developed, such as solar and wind.

Historically, complex hydrocarbon projects operated as integrated entities, but now the efficacy of this single structure is being called into question. One of the key factors underpinning this profound shift away from the fully integrated model is the desire of oil & gas incumbents to free up capital across the hydrocarbon value chain and efficiently deploy it on other ventures, particularly those enabling them to lower their carbon footprint.