The Global Energy Transition series from Reuters Events are seen as one of the most important gatherings in the sustainability business calendar, bringing together stakeholders across industry. The message of collaboration and innovation was hammered home in a speech by Baker Hughes CEO Lorenzo Simonelli.
The global energy transition is gathering pace: according to Bloomberg NEF, 2022 saw global energy transition investment equal fossil fuel investment for the first time. While fossil fuel investment grew by $214 billion year-on-year – admittedly not a great sign – energy transition spend was up $261bn. The figures included what Bloomberg NEF called a ‘significant’ shift towards clean energy investment; ‘a trend unlikely to be reversed’, the company noted.
Taking its cue from a need to unite energy, industrial, and government leaders to ‘shed light on the defining issue of our time’, the Reuters Events Global Energy Transition series remains one of the most important sustainability business gatherings of the year.
The most recent event, in New York in June, saw the usual demands for greater affirmation and action. Among the event’s partners were Bain & Company, Baker Hughes, Microsoft, and Shell. The latter may cause a few eyebrows to be raised – not least because a day after the event concluded, Reuters exclusively reported on Shell’s strategy to pivot back to oil to win over investors – yet the need for all stakeholders to improve was evident.
Today, Baker Hughes describes itself as an energy technology company. It’s a little different to how the company introduced itself 25 years ago as a ‘leading supplier of reservoir-centred products, services, and systems to the worldwide oil and gas industry.’ Yet the sands of time must shift – particularly if oil is made from it.
Baker Hughes is committed to reducing its emissions by 50% by 2030, and moving to net zero by 2050 in line with Paris Agreement goals. CEO Lorenzo Simonelli told delegates at a recent Global Energy Transition virtual event that the company was ‘well on [the] way’ to achieving that goal. But there was a caveat; Simonelli warned that without ‘major acceleration’, the industrial sector would not meet the Paris Agreement targets.
This was the first of three ‘undeniable truths’ Simonelli offered. The other two were: there is no scenario where hydrocarbons disappear, so efficiency matters; and there is no path to net zero without partnership and collaboration. “It sounds obvious, but we often forget about the power of collaboration and how it is a success factor for the energy transition,” said Simonelli.
The dual challenge of reducing emissions alongside providing accessible and reliable energy to the world was a ‘great opportunity’, Simonelli added. “We have an opportunity to change. We must be more positive,” he said. “We must recognise our ability to adapt ourselves and our customers solving complex technical challenges together. With everyone’s alignment, we will see success.”
Embrace being first-movers.
From a regulatory standpoint, Simonelli called upon regulators and policymakers to ‘incentivise innovation’. The cue for this is from the International Energy Agency (IEA), who notes that almost half of annual CO2 emission savings by 2050 will need to come from technologies which are not yet commercialised. Simonelli noted that new technology development for hydrogen, carbon capture and storage (CCS), geothermal, and energy storage, was key, noting that for hydrogen in particular, new projects can be ready to deploy with little to no major upgrades of current turbo machinery equipment – an area Baker Hughes certainly knows about.
“Embrace being first-movers,” added Simonelli. “Do not shy away from collaboration. We are stronger together, as policymakers, corporations, and consumers, to advance the energy transition faster. We must seize this moment.”
One potential example of a company whose technological innovation stands up over the decades is Computer Modelling Group (CMG), a reservoir simulation software provider. In 1997, Japan Oil Engineering (JOE) approached CMG with the subsequent result being the development of GEM, then-revolutionary but now seen as an industry standard for CCS and hydrogen modelling among others.
Pramod Jain, chief executive of CMG, spoke at the New York event of solutions available now, opportunities and challenges, with a nod to CCS specifically. “We all are under the guidance of net zero,” he told delegates. “There are multiple technologies or solutions out there right now which are still in the early phases of development. The challenge at hand is [that] a lot of capital expenditure, a lot of infrastructure is required, so the journey ahead is quite steep in some of them.
“The right tool is important,” added Jain. “One of our clients [was] fined close to $300 million. Why was that the case? In their words, had they invested in the right technology, the right modelling, physics, geochemistry, geomechanics, it would have been a fraction of the fine that they would have paid to the regulators.”
For carbon capture, there are four ways in which CO2 can get trapped: structural trapping, where CO2 stays inside the ground; mineral trapping, where the carbon can become calcites over the years; solubility, where CO2 starts to dissolve into water; and residual trapping. Jain noted the various challenges and complexities with modelling and the scenarios which could play out.
“What you have to make sure is that you are ensuring the integrity pressure [of the reservoir], the temperature and the geomechanics of the geochemistry,” said Jain. “When geomechanics can go wrong, you can have leakage at the walls and the surface of the reservoir. Geochemistry [goes wrong], you can have all kinds of injection issues that can have issues in terms of the volume and mobility of carbon dioxide inside the reservoir. If the injection pressure is not optimised, you can have faults starting to leak which were not there before.”
Not using a technology is not an option; using a subpar technology is not an option.
Jain noted that the company doesn’t ‘want to stop in terms of what we built 20 years ago’, but again emphasised the need for precision. “You cannot take a lot of risk on carbon capture. When things go wrong, you can get fined, sued, in some extreme cases loss of life can happen. [The] stakes are very high,” he said.
“Not using a technology is not an option; using a subpar technology is not an option. This is not the place for experimentation; you really have to go with the tried and tested simulation modelling where you can mimic all the possible constraints,” Jain added.
