This year’s annual gathering of energy majors at CERAWeek in Houston was dominated not by talk of fossil fuels, but of climate change. As the focus moves from the cost to the value of renewables, power and gas players are being pushed to integrate to accommodate energy transition and are rebranding around a sustainable agenda.
There has been a noticeable shift in the conversation taking place among major energy players in the past year or so, with last month’s annual CERAWeek conference in Houston proving a case in point. Where once industry conventions were dominated by conventional fossil fuels, in 2019 the focus was clearly on energy transition, as the energy world finally starts to come to terms with the need to take climate change seriously and work to lower carbon emissions.
The industry as a whole is now rapidly moving to burnish its green credentials, as the transition agenda puts pressure on employer brands at a time when the next generation of talent is more focused than ever on corporate social responsibility and environmental impact. The themes that are front of mind for power and gas majors now include rebranding, investing in clean energy assets and identifying and developing technologies to accommodate the energy value chain.
Over the past decade, clean energy has shifted from playing a marginal role to being integral to global energy systems, but despite costs coming down, there has been a clear move to focus on the value of renewables and how it complements the power and gas markets.
The recent decision by Shell to rebrand First Utility, Britain’s seventh largest energy supplier, as Shell Energy and move all its residential customers to renewable electricity highlights the increasing consumer demand for cleaner energy. Shell has just pledged to reduce emissions of its operations and product sales by 2 to 3% from 2016 to 2021, and is only the latest to reconsider its branding; last year Statoil became Equinor, as it moved to distance itself from oil and become a more diverse energy brand, and in 2016 GDF Suez became Engie, earlier last year rolling out phase 1 of their ambition to become the world leader in zero-carbon transition for its customers.
It is also increasingly clear that natural gas will be at the forefront of this revolution, with 2019 already looking like it will be a record year for construction projects to bring online more capacity. Major new suppliers including Russia and Mozambique look set to enter the fray alongside the three leading suppliers of Qatar, Australia and the United States, as China gears up to become the world’s largest natural gas importer and demand from the rest of the Asia Pacific market continues to boom. While in the past, investment was held up by the lack of long-term supply contracts, we now see companies more willing to develop projects on their own balance sheets and able to sell to either a growing group of aggregators or trading houses.
New opportunities are being created across transportation and production, and there is great interest in new technologies across digitisation, artificial intelligence and blockchain, which may assist in addressing some of the challenges around the increasing penetration in clean energy. What is abundantly clear is that energy transition is now playing a huge role across the entire energy value chain, throughout the industry, as the need to reduce hydrocarbons moves from being a fashion to a business imperative.
Power, Gas and LNG are now more correlated than ever, and we see the market shifting towards even further integration to accommodate energy transition. In terms of natural gas, it is well placed due to its friendly environmental footprint with LNG spear heading trade growth in the years to come. From a hiring perspective, it is now vital to have clear transition strategies in place if a business is to appeal to the next generation of energy talent, and this is a global phenomenon.