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The Energy Transition, Stupid

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Johan Sverdrup is projected produce less than 1 kg of CO2 per barrel. The world average is estimated at 18 kg. (Photo: Ole Jørgen Bratland / Equinor)

Johan Sverdrup is projected produce less than 1 kg of CO2 per barrel. The world average is estimated at 18 kg. (Photo: Ole Jørgen Bratland / Equinor)

“Fit at 50”, “life begins at 70” and “the swinging 60s” were all slogans chosen to reflect oil price market sentiment in 2017, 2018 and 2019, respectively. This year, at the Society of Underwater Technology’s (SUT) annual Global Subsea Market Outlook Business Breakfast, it was “the energy transition, stupid”.

In fact, while Mike Beveridge, managing director of energy investment firm Simmons Energy, did use the first three slogans, he didn’t use the play on the oft-repeated Bush campaign mantra (“the economy, stupid”). But, he might as well have.

“A year ago, we were not using any of these phrases,” such as net zero, decarbonization, range anxiety, climate emergency, he told the event, held in Aberdeen this morning (January 30). “Greta Thunberg has changed the rhetoric. This year, no one talks about the oil prices. The oil price doesn’t matter in peoples’ thinking. It would matter if it went to $40/bbl, but it wouldn’t matter if it went to $100. We’re in a different world. At every event now all you hear about is the energy transition.”

Henning Bjørvik, an analyst in the Oilfield Service team at Rystad Energy with a primary focus on the subsea market, agrees. “2019 was a turning point,” he told the event. “There’s not only climate change driving this, underlying this is also technology (eg. electric cars), companies divesting from oil and gas, it’s coming from all angles now.”

So, what has the oil price been doing? It averaged $64/bbl in 2019 and has followed that trend into 2020, despite big geopolitical events. The attacks on Saudi oil facilities saw prices spike, but within a week they had rationalized, points out Beveridge. The same happened when Iranian general Qasem Soleimani was attacked. “It seems to me there’s no more geopolitical risk in the oil price,” he says.

But what’s really driving investor sentiment is future demand. How strong and how long it will last remains a big unknown. Beveridge believes that global population growth will still drive a need for energy and the stuff that produces it.

Rystad predicts 2028 will see peak demand for oil, “largely due to electric vehicles”. Others, eg. oil companies put the date in the 2030s, while some green organizations and Norwegian risk management firm DNV GL put it in the mid-2020s.

But, whether peak demand is in 2028 or 2038, “as soon as the world thinks we’re heading towards peak demand it changes mindsets and changes investment decisions,” says Beveridge.

So, while growth is predicted, there’s a “horrendous” capital market disconnect between oil prices and market valuation, at up to -62% in some cases, which have in the past been more connected. Beveridge says that “equity values have been decimated”, with hundreds of billions of dollars of lost value in the last few years because of market sentiment focusing on a lack of future prospects. Mergers and acquisition activity has also been slow, for similar reasons. “It’s been a difficult market,” with few believes, more observers but even more skeptics.

Mike Beveridge (left) and Henning Bjorvik. (Photo: Elaine Maslin)

Meanwhile, climate change and the energy transition dominate the agenda, not always positively. It is mis-informed, unbalanced and incredibly unhelpful, missing out discussion about different energy sources, energy’s role in the world and the contribution the oil and gas industry makes to the greenhouse gas discussion, he says.

What’s more, the change in rhetoric has caught the industry out, “like a deer in the headlights”, Beveridge says, showing an image of a deer, in a vehicle’s headlights. “They’ve no idea what to do. Our industry has had so few spokespeople, nobody talking sensibly about how we should react to or defend our position in the world’s energy mix.”

But the effect is marked. Oil companies one by one have set aggressive goals to decarbonize their business. Equinor has been boasting about the Johan Sverdrup development being the lowest carbon production in the world, highlights Beveridge. Johan Sverdrup is powered from shore, using green Norwegian power, and is projected produce less than 1 kg of CO2 per barrel. The world average is estimated at 18 kg, says Beveridge. “Now companies are fighting among each other to produce the lowest carbon production in the world.”

“Operators are really taking this seriously,” with BP investing in solar, Equinor, Total and Shell in the Northern Lights carbon capture and storage project, and others, says Bjørvik. Some companies’ renewables projects, such as Dogger Bank, set to be the world’s largest offshore wind farm at 3.6 GW, are even bigger than any of their oil and gas projects, such as Equinor’s Bacalhau Bay du Nord, points out Bjørvik. But, put into perspective, they’re still investing more in oil and gas and are promises to cut emissions to zero by 2050 going to be enough, Bjørvik questions.

Amidst this change, the industry faces a trilogy of threats, says Beveridge: the ethical investment agenda, where money is moving away from the sector; talent drift from the industry, it being hard to recruit young people (but not the boom and bust talent drift of the past); and cyber attacks. “Clients of ours have been badly affected by that and it’s not just bad luck it’s people being targeted by anti-fossil fuels parties,” he says.

We’re also in a changed industry. It’s become less cyclical, “we’re in a permanent new norm, possibly”, the public markets are closed, there are a lot of uncertainties around exit options, a global mindset is now more a regional mindset and companies are obsessed by cash flow not EBITDA, he says. We are in “a very odd market right now,” he says, where subsea activity levels are starting to pick up, but we have horrendous investor sentiment. To fix that, more rational conversations are needed – and are happening – but, firms the industry also has to look attractive and be profitable to attract investors.

But, it’s not all doom and gloom. There are glimmers of light, for the right themes, such as digital and data offerings, pipeline services and inspection, automation and robotics, materials like composites and anything that has an environmental impact on operations. And, “There are reasons to be cheerful,” he says. “We can see real supply tightness in the next two or three years. We see we’ve got a subsea investment cycle ahead of us. There will be winners and losers within our sector; if you have a new strategy or technology, you’re going to be a winner.”

OE



23 Comments on "The Energy Transition, Stupid"

  1. makati1 on Fri, 31st Jan 2020 5:58 pm 

    Trying to justify his job so more suckers…er…investors don’t jump the sinking oily ship. (Pun intended)

    No intelligent young person wants to go into debt to get an education in a dying business. Oil has no long term future. Certainly not the 40-50 years to justify a degree and retire. LOL

  2. Sissyfuss on Fri, 31st Jan 2020 6:47 pm 

    Greta didn’t change the rhetoric, she is relentless with the science and the climate catastrophes are giving her data presence. But it looks too late to stop the many tipping points from climbing on board.

  3. Anonymouse on Fri, 31st Jan 2020 8:33 pm 

    “What’s more, the change in rhetoric has caught the industry out, “like a deer in the headlights”, Beveridge says, showing an image of a deer, in a vehicle’s headlights. “They’ve no idea what to do. Our industry has had so few spokespeople, nobody talking sensibly about how we should react to or defend our position in the world’s energy mix.”

    Now that is funny, if completely un-intentional on the writers part. To suggest the uS oil cartel are helpless babes in the woods when it comes to defending their public image, is laughable. Oh, they have an image problem alright, but it is not a ‘new’ problem. Big oil has a long history, and experience, when it come to spin, damage control, and influencing public opinion that only a few other industries can match. Big oil has likely spent more on spin, PR and astroturfing, not to mention bribing captured politicians, than they ever did on R&D. To suggest otherwise, is comical to say the least. But that is exactly what this guy did.

  4. makati1 on Sat, 1st Feb 2020 1:23 am 

    If oil was priced according to the usable energy it contains…

    “A Barrel of Crude Oil is Worth $164,000 – The Human Labor Equivalent of a Barrel of Oil. I heard that in a single barrel of oil there is the energy equivalent of 23,000 human labor hours. This amounts to 12 years (40 hours per week) if vacations are factored in.”

    …it would not be wasted and the original recoverable amount would have lasted hundreds of years without the climate effects. But, greed got in the way of intelligence as always.

    https://www.google.com/search?client=firefox-b-d&q=human+man+hours+of+labor+in+a+barrel+of+oil%3F

    If you don’t believe the number, put a gallon of gas in your car and then PUSH it the number of miles you would get by driving using the gallon of gas.

  5. dave thompson on Sat, 1st Feb 2020 2:29 am 

    Good point There Mak Folks just never do get it because it takes way to much thinking. When
    ever I have pointed out just what the energy inputs do for our industrial civ. Most people just do not hear it and turn a blind eye to the latest feel good idea.

  6. JuanP on Sat, 1st Feb 2020 5:02 am 

    “Now that is funny, if completely un-intentional on the writers part. To suggest the uS oil cartel are helpless babes in the woods when it comes to defending their public image, is laughable. Oh, they have an image problem alright, but it is not a ‘new’ problem.”

    Annon, you guys have an image problem in Canada with tar sands hypocrite.

  7. Davy on Sat, 1st Feb 2020 5:19 am 

    “Virus Shock Crashes Baltic Dry, Sparks China Hard-Landing Fears”
    https://tinyurl.com/v4mpzoz zero hedge

    “The Baltic Exchange’s main sea freight index plunged on Friday, with rates for capsize vessels hitting a record low as an economic shock could be developing in China as two-thirds of its economy has been shut down because of the coronavirus outbreak…We’ve noted that the “frontloading” effect ahead of tariff deadlines ended in late 3Q19 when the first signs of a trade resolution emerged between the U.S. and China. In the last four months, the Baltic index has crashed the most since 2008 and has confirmed our slowbalisation thoughts…And now, the situation is much worse, and the reason is that the global economy was already weakening and susceptible to a shock. The Federal Reserve’s tightening cycle, coupled with President Trump’s trade war blowing up complex supply chains around China and the world, did immense damage to the global economy and world trade. It opened up something cycle folks call a “period of vulnerability,” and it’s in this timeframe that the global economy could be tilted into recession if an exogenous shock is seen. That shock, as per the former Morgan Stanley Asia chairman Stephen Roach said this week, happens to be coronavirus outbreak shutting down China’s economy, and the shock may vibrate across the world in the weeks or months ahead. “With the world economy operating dangerously close to stall speed, the confluence of ever-present shocks and a sharply diminished trade cushion raises serious questions about financial markets’ increasingly optimistic view of global economic prospects,” Roach said via his op-ed in Project Syndicate”

  8. Davy on Sat, 1st Feb 2020 5:45 am 

    “Exclusive! Dr Victor Shih: Coronavirus MUCH worse than SARS”
    https://tinyurl.com/tc7647d macro business

    “Fireside Chat w/ China Economist, Victor Shih, Sheds Light on the True Extent of Coronavirus “Threat”. In short, after our conference call this morning with Harvard educated Chinese economist & former principal for the Carlyle Group in its hedge fund arm in New York City, Victor Shih, we believe the market is grossly underestimating the potential negative knock-on effects from the coronavirus outbreak in China…In short, in Mr. Shih’s view, based on his work suggesting “hundreds of thousands” of potentially infected Wuhan residents left for Shanghai & Guangdong, the number of cases being reported in these economically important provinces (66 and 207, respectively) are likely “grossly” understated, suggesting the impact to growth, globally, will be much worse than currently implied by market valuations…Furthermore, and rather telling, Mr. Shih said many of his friends in the upper-middle class, or the ones who go to restaurants, buy cars, and are the real consumers of goods in China, are telling him they plan to stay “inside their homes” & “eat ramen noodles” out of fear of contracting the virus. In Mr. Shih’s view, it is this mentality among China’s “rich” that will likely wreak havoc on consumption throughout the country over the next 6-to-9 months. In fact, Mr. Shih described the impact as a “massacre” to consumption… based on discussions he’s had (and continues to have) with epidemiologists, Mr. Shih said he puts very little faith in this prediction, and believes it will take at least another 2-to-3 quarters for the Chinese government to get control of the viral pandemic. In fact, Mr. Shih noted that the ratio of serious cases (i.e., people who needed to be treated in the intensive care units [“ICU”] of hospitals) to the total infected is actually closer to 30%.”

  9. Davy on Sat, 1st Feb 2020 6:15 am 

    “William E. Rees: Don’t Call Me a Pessimist on Climate Change. I Am a Realist”
    https://tinyurl.com/whuhjut energy skeptic

    “We can probably agree that techno-industrial societies are utterly dependent on abundant cheap energy just to maintain themselves — and even more energy to grow. The simple fact is that 84 per cent of the world’s primary energy today is derived from fossil fuels. It should be no surprise, then, that carbon dioxide from burning fossil fuels is the greatest metabolic waste by weight produced by industrial economies. Climate change is a waste management problem! Cheap fossil energy enabled the world to urbanize…Building out these and hundreds more large cities will require much of the remaining allowable carbon budget. Moreover, the current and future inhabitants of every modern city depend absolutely on the fossil-fuelled productivity of distant hinterlands and on fossil-fuelled transportation for their daily supplies of all essential resources, including water and food. Fact: Urban civilization cannot exist without prodigious quantities of dependable energy…As long as the growth in demand exceeds additions to supply from renewables, the latter cannot displace fossil fuels even in electricity generation — and remember, electricity is still less than 20 per cent of total energy consumption, with the rest being supplied mostly by fossil fuels. Nor is any green transition likely to be cheap. The cost of land is substantial and, while the price of solar panels and wind turbines have declined dramatically, this is independent of the high costs associated with transmission, grid stabilization and systems maintenance. Consistently reliable wind and solar electricity requires integrating these sources into the grid using battery or pumped hydro storage, back-up generation sources (e.g., gas turbines, cruise-ship scale internal combustion engines, etc.) and meeting other challenges that make it more expensive.”

  10. REAL Green on Sat, 1st Feb 2020 7:22 am 

    We are in a new time when less is more which is different than more with less. This pits the abstract against the tangible. Today one must distill knowledge instead of produce knowledge. Where distillation has to start is a wisdom of less from the embrace of a decline process. Decline these days is defined as problems to be solved instead of a planetary trend. Growth is deceptive because a significant amount of growth does not bring a real return and instead hidden by debt and unfunded liabilities. Much of the growth today is from techno optimistic kinds represented by high tech real and theoretical. Today’s gatekeepers are promoting high growth with high performance. Even greens today must hype green as a revolution to a transition. Modern green is high tech based and says efficiency and clean growth will continue to be affluent. Even Degrowthers point to success of a green process which ensures stability of circular economy avoiding the idea of collapse.

    If one starts with a distillation with a decline-based view then what is less potent but more sustainable and resilient in relation to destructive change is embraced. Many old ways can be enhanced with modern tech and knowledge but first simplicity and decline must be embraced. Embracing decline means realizing tech will be an extender for a journey not the destination. In fact, embracing this way ensures a journey to a kind of collapse. It will be like the ability to fight in retreat like the Germans did so well in WWII on the eastern front. They battled in a fighting withdrawal effectively but the outcome was never in doubt. So, less knowledge is needed with less noise and to get at this very vital and valuable knowledge one must discriminate anything high tech and claiming growth with affluence.

    We are going to be poorer because this is the nature of succession. The planet is in succession and the human project is also in succession because the planet gives acquiescence to the human project. Knowledge and lifestyle that are simple are to be embraced in this process. This means triage and it means cleaning up the deadwood. It means picking what low hanging fruit is there still to enhance and fortify the difficult process of a forced degrowth ahead. This is realism based upon honest science. It comes with acceptance of failure and the rejection of techno optimism primary message that failure is not an option. A stable complex planetary ecosystem is lost as well as higher civilization. Modern humans cannot arrest planetary decline. All species can only follow the planetary gradient.

    This does not have to mean total collapse but it does mean a succession to less complexity and more destructive change with its accompanying abandonment, dysfunction, and irrational. These forces can be mitigated and adapted to with the constructive forces of modern knowledge that is sound and effective. The temptation to more tech and efficiency is the issue. The human dopamine is high for more and nonexistent for less but it is less that is the key. So, the cure is a hybrid force of being able to take the best of what humans have achieve and apply it to real human scales that were present before the modern time. This is low carbon capture and small-scale footprints dominated by intermittency and seasonality. These are the antithesis of modern on demand and global. Realgreenadaptation.blog

  11. jawagord on Sat, 1st Feb 2020 8:26 am 

    I stopped reading when the author wrongly cites Bush for the most famous Clinton campaign bromide.

    As democratic strategist James Carville famously put it during Bill Clinton’s successful 1992 presidential campaign, “It’s the economy, stupid.”

  12. REAL Green on Sat, 1st Feb 2020 11:54 am 

    Schizophrenia

    Symptoms:

    Delusions. These are false beliefs that are not based in reality.

    you think that you’re being harmed or harassed;

    certain gestures or comments are directed at you;

    you have exceptional ability or fame;

    or a major catastrophe is about to occur.

    Delusions occur in most people with schizophrenia.

    Disorganized thinking:

    may include putting together meaningless words that can’t be understood, sometimes known as word salads.

    schizophrenia.org

  13. Cloggie on Sat, 1st Feb 2020 12:12 pm 

    JuanPee, we all know the above is you and BTW you are projecting. You are the schitzo with your multiple personalities BS. Fuck off

  14. The REAL Davy on Sat, 1st Feb 2020 1:22 pm 

    Delusional davy, we all know the above is you and BTW, you are projecting. You are the schitzo with your multiple personalities BS. Fuck off

  15. Cloggie on Sat, 1st Feb 2020 1:29 pm 

    juanPee, you appear upset. LOL. We know the above is you so quit your games, pussy. Leave the smart people alone. We are sick of your fag day shit, Cunt Face.

  16. The REAL Davy on Sat, 1st Feb 2020 1:56 pm 

    davyskum, you appear upset. LOL. We know the above is you so quit your games, pussy. Leave the smart people alone. We are sick of your fag day shit, Cunt Face.

  17. Davy on Sat, 1st Feb 2020 2:34 pm 

    Y’all no were REAL Triggered when we use the ‘cunt face’ and ‘fuck’ wurds. Cunt face and fuck our REAL Bad cussin wurds. Fags not as bad as cunt face and fuck are.

  18. Cloggie on Sat, 1st Feb 2020 5:50 pm 

    The above is obviously juanPee. Ignore the troll please

  19. The REAL Davy on Sat, 1st Feb 2020 8:03 pm 

    The above is obviously dumbass davy. Ignore the troll please

  20. Abraham van Helsing on Tue, 4th Feb 2020 4:41 am 

    “Beautiful Clean Coal latest”

    US DOE to pump $64 million in optimizing electrolyzer technology:

    https://cleantechnica.com/2020/02/01/64-million-makes-it-official-renewable-hydrogen-in-natural-gas-out-eventually/

    Goal: renewable hydrogen for $2,-/kg or less.

    1 kg hydrogen is 33 kWh, where 1 kilo of diesel contains only 12 kWh.

    That would be the ultimate breakthrough, or as they used to say in Germany, the Endsieg of renewable energy. No need for discussions about whether climate change is real or how much oil there still is left. No, renewable energy would have won on price. Case closed, end of discussion.

    Can I have a round of applause for the DOE please. Yes, I mean you too, empire dave. Anything else would be anti-American and we are all glad we are not like that.

  21. Davy on Tue, 4th Feb 2020 4:58 am 

    “Can I have a round of applause for the DOE please. Yes, I mean you too, empire dave. Anything else would be anti-American and we are all glad we are not like that.”

    You are the one talking about North Sea coal extraction as if that is an option for Europe. I have never promoted coal. Sounds like you are doing more of your speaking for other lie that you do so often. Hypocrite.

    “That would be the ultimate breakthrough, or as they used to say in Germany, the Endsieg of renewable energy. No need for discussions about whether climate change is real or how much oil there still is left. No, renewable energy would have won on price. Case closed, end of discussion.”

    Yea, cloggo, “breakthrough” as in not reality yet. Affordability and scaling are never really touched on by the cloggo. Wind and solar are very expensive once significant penetration of energy sources are achieved. The cloggo thinks technology makes KWs free. Remember NUK energy that was too cheap to meter. More blabbering BS from the board techno-retard.

  22. Abraham van Helsing on Tue, 4th Feb 2020 5:42 am 

    “You are the one talking about North Sea coal extraction as if that is an option for Europe.”

    It is an option. Explain why it isn’t. You can’t.

    Tic-toc-tic-toc

    “Sounds like you are doing more of your speaking for other lie that you do so often. Hypocrite.”

    I have never promoted UCG, only pointed out to the doomers like you here, that there is ZERO danger of running out of fossil fuel, EVER. Ah well, as long as it gives you an opportunity to launch a smear, right, the main Anglo export article, hardly making up for their glaring deficits, wherever you look.

    https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance

    I keep promoting the renewable energy policy of the EU, namely moving into 100% renewable as soon as possible, preferably without using UCG. If we hurry up, we don’t have to.

    “Wind and solar are very expensive once significant penetration of energy sources are achieved.”

    Not anymore if we have $2/kg hydrogen. The DOE and many other parties around the globe are working on it. Rest assured the target will be met in a couple of years.

    “The cloggo thinks technology makes KWs free.”

    Empire dave has yet to figure out the difference between “free” and “2$/kg”. He is from the Ozarks.

    “Remember NUK energy that was too cheap to meter. More blabbering BS from the board techno-retard.”

    I never said that NUK was “too cheap to meter”.

    There is unmistakably a desperate and angry undertone in empire dave his posts. One wonders what he does know what we don’t.

  23. Davy on Tue, 4th Feb 2020 6:16 am 

    “You are the one talking about North Sea coal extraction as if that is an option for Europe.” It is an option. Explain why it isn’t. You can’t. Tic-toc-tic-toc”

    Likely not an economic one Explain why it is and please don’t use lonely USSR data we are talking the 21st century now.

    “Sounds like you are doing more of your speaking for other lie that you do so often. Hypocrite.” “I have never promoted UCG, only pointed out to the doomers like you here, that there is ZERO danger of running out of fossil fuel, EVER.”

    LOL, affordable fossil fuels is a different story but I agree in your fantasy world of cost is not an issue we will never run out.

    “Ah well, as long as it gives you an opportunity to launch a smear, right, the main Anglo export article, hardly making up for their glaring deficits, wherever you look. https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance”

    Cloggo, has no clue about current account meaning. What the cloggo is doing is cherry picking one number and saying here look we are the best. What a dupe! Tell us oh great cloggo why is the EU in the worst shape economically today of all major powers?…(except now maybe China). “Explain why it is. You can’t. tic-toc-tic-toc” LMFAO

    “I keep promoting the renewable energy policy of the EU, namely moving into 100% renewable as soon as possible, preferably without using UCG. If we hurry up, we don’t have to.”

    One thing the cloggo’s fantasy does not have is legitimate science, money, and time so I can see why he is in such a hurry. The cloggo is very worried.

    “Wind and solar are very expensive once significant penetration of energy sources are achieved.” “Not anymore if we have $2/kg hydrogen. The DOE and many other parties around the globe are working on it. Rest assured the target will be met in a couple of years.”

    Sure, it is too expensive at higher penetrations, cloggo. There is no $2/kg hydrogen at scale. Your little laboratory does not count. We are talking economy wide infrastructure then get back to me in 100 years. BTW, enlighten us on the stalling of the EU renewable effort that is happening as we speak. “Explain why it is and why it isn’t. You can’t. tic-toc-tic-toc” LMFAO

    “The cloggo thinks technology makes KWs free.” “Empire dave has yet to figure out the difference between “free” and “2$/kg”. He is from the Ozarks.”

    Free, cloggo, that is what you said in the past about wind and solar…free…bs from the tech retard. It is not cheap and it will never be at cloggo scales.

    “Remember NUK energy that was too cheap to meter. More blabbering BS from the board techno-retard.” “I never said that NUK was “too cheap to meter”.

    No, cloggo, but that is what tech retards like you said years ago. I remember when I was a kid the talk.

    “There is unmistakably a desperate and angry undertone in empire dave his posts. One wonders what he does know what we don’t.”

    LOL, cloggo, I am reveling in the enjoyment of moderating and neutering your lies. The anger is with you and you are definitely desperate.

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