Adipec Conference 2021

Impact of technology on sector to illuminate the strategic conference during Adipec

Adipec 2021 opens with a focus on how the emergence of AI, robotics and machine learning is helping efficiency, profitability and value creation, amid the energy transition and climate goals

Technology is a crucial contributor to an energy industry focused on efficiency, safety and profitability. If data is the new oil, then big players in oil and gas are tapping into their reserves like never before, using artificial intelligence, the Internet of Things and robotics to navigate the massive challenges and opportunities of the 21st century.

Artificial intelligence

Artificial intelligence is among the most hyped up technology of the Fourth Industrial Revolution. For good reason.

Our ability to programme computers to perform tasks commonly associated with intelligent beings is expanding exponentially as computing power increases and the cost of data storage comes down.

A report by Italian energy company Eni found that the energy industry is ripe for disruption from AI because the resource the technology is built upon is abundant in the sector: data. Sensors, archived information, maps and camera footage are all big contributors of data in the energy industry.

There are a number of examples of companies using AI to look at archival data to improve the accuracy of exploration or extend the life or productivity of wells.

Woodside Petroleum uses IBM’s AI programme called Watson to catalogue engineering data about Woodside’s gas projects off the coast of Western Australia.

Engineers are able to pose engineering-related questions to Watson in natural language, Watson interprets the question and then presents the studies, ranked in order of relevance. Woodside estimates that before Watson, their engineers spent as much as 40 per cent of their time searching for previous studies and analysis. This captured time is now available for more productive engineering work by reducing search-times by 75 per cent.

The UAE has some of the cheapest barrels of oil in the world, partly because of efficiencies realised through technology. Adnoc, which is preparing to diversify its energy offerings in line with the UAE’s planned commitments towards clean energy, is increasingly streamlining its drilling operations and generating environmental and cost efficiencies.

The company’s use of advanced technology such as integrity sensors has also helped to generate a 30 per cent reduction on logging time over the past two years. Adnoc Drilling helped to save $20 million by lowering well delivery time.

Adnoc’s digital command centre Panorama, which opened several years ago, “changed the game for how Adnoc leverages big data and artificial intelligence to guide our decision-making,” according to Dr Sultan Al Jaber, Minister of Industry and Advanced Technology, and managing director and group chief executive of Adnoc.

Adnoc is also evolving from a company that acquires the latest technology to one that develops innovative solutions for itself and the industry. An example of this is AIQ, Adnoc’s joint venture with Group 42 set up last year to hasten the development of AI solutions to optimise processes and increase profitability for Adnoc and the wider oil and gas industry.

Meanwhile, the world’s first research university devoted to AI opened its doors to students in Abu Dhabi this autumn. The Mohamed bin Zayed University for Artificial Intelligence plans to eventually open a dedicated energy research centre for the development of AI solutions.

Internet of Things

Energy infrastructure is increasingly being loaded up with sensors and connected to the internet. With this migration to the Internet of Things comes the potential for major cost savings as IoT allows for constant monitoring and correction to operate more efficiently.

The promise of IoT “lies not in helping oil and gas companies directly manage their existing assets, supply chains or customer relationships; rather, IoT technology creates an entirely new asset – information about these elements of their business”, said Deloitte.

Analysts at Japanese bank Nomura found that oil and gas companies could in future be more profitable with oil prices at $70 a barrel than they were at $100 a barrel by using IoT.

The information gleaned allows companies to be more efficient and reliable, and to create new value in areas ranging from dealing with unplanned well disruptions to boosting the amount of reserves that can be recovered from wells. This enables companies to better monitor assets and infrastructure, and follow up on accidents or disruptions, remotely and safely.

Robotics

Robots are increasingly being used to substitute for humans in low skilled or risky jobs, or are becoming “co-workers”, helping to improve the effectiveness of exploration and production, as well as the cycle of inspection, maintenance, and repair, according to Getac, a rugged computer company jointly owned by GE.

The company cites a collaboration between ExxonMobil and MIT that is producing an AI-enabled submersible subsea robot to apply technology first used by Nasa in exploring Mars. The robot is able to operate independently, mapping deep regions and analysing changes over time.

ExxonMobil intends to increase discovery through this smart machine. The aim is for machine learning to one day train this robot to conduct routine maintenance tasks such as turning a underwater valve, according to Getac.

The company predicts that the future of offshore oil and gas is unmanned platforms operated, inspected and maintained by teams of independent, AI-enhanced robots.

Digital acceleration

Taken together, such technology represents a tectonic shift in the energy industry – one that is bound to accelerate.

Philip Whittaker, partner and director for oil and gas at the Boston Consulting Group, said offshore oil and gas companies were asking how they could use technology to be more resilient and create less cyclical businesses.

Speaking at an Adipec event last year, he highlighted some lessons learnt during the Covid-19 pandemic. Projects around the world were shut, crews recalled from offshore platforms and work reduced to core production operations.

But digital technology helped to “create a stronger, really sustainable offshore business in the mid-term”, he said.

Mr Whittaker gave an example of a BCG client that had to demobilise 40 per cent of its crew from its platforms in the North Sea during the pandemic. But through the use of wearable technology, combined with digitised remote viewing and remote work planning, the company was still able to accomplish 90 per cent of the plant maintenance and integrity activity it had planned. 

“It really starts to drive us towards the use of technology to do more with less, which has to be good for everyone,” Mr Whittaker said.

The push to integrate more digital technology in offshore oil and gas also presents a new opportunity to recruit, he said.

“Beyond geoscientists, beyond traditional engineers, we need to attract the data scientists.”

Shifting mindset of oil and gas majors gives the energy transition added forward momentum

Big European and US companies have undergone a strategic shift after the Covid-19 pandemic and a consensus on net zero carbon emissions disrupted traditional business models

Oil and gas companies that were purely focused on profit and maximising production have started to shift strategy, prioritising products with a lower carbon impact.

The industry had already, in recent years, begun to pivot towards downstream, finding new uses for hydrocarbon products that did not result in direct emissions being released into the atmosphere.

Even the move to downstream was not enough, however, with Big Oil considering the longer-term repercussions of engaging in the exploration, development and trade of fossil fuels.

Several international oil companies rebranded themselves as energy companies to embrace a more holistic approach to energy. What began as a reckoning among countries with greener and more progressive agendas started to seep into the oil and gas industry. Covid-19 and the resulting fall in emissions provided the much-needed impetus to make a change.

BP wrote off billions of dollars as it pared down its hydrocarbon-based portfolio and lowered its crude price assessments in 2020, amid a wider shake-up of the industry.

The company said there was a growing expectation that “the aftermath of the pandemic will accelerate the pace of transition to a lower-carbon economy and energy system, as countries seek to 'build back better' so that their economies will be more resilient in the future”.

Shell also wrote off billions of dollars from its hydrocarbon portfolio while Total rebranded itself to TotalEnergies to reflect its growing adoption of cleaner energy.

The shift among European Big Oil companies towards climate change comes amid a broader reckoning of emissions, which fell during the Covid-19 pandemic.

The crunch in demand eviscerated the profits of the industry, leading executives to question the long-term viability of continued investment in fossil fuels.

The change in mindset has also shaken up the pro-fossil fuel ExxonMobil, which has had to reckon with a new threat to business-as-usual in the form of activist investors.

The company acquiesced to pressure from activist investor Engine No 1 and took the pledge to reach net zero by 2050 in December last year.

Exxon chief executive Darren Woods had previously dismissed efforts by European Big Oil operators to adopt carbon abatement strategies as a “beauty competition”.

The company came under pressure after investment company Engine No 1 shone a light on its poorly diversified commercial operations and said it faced an “existential business risk” due to its slow progress in energy transition.

Exxon Mobil’s efforts at increasing carbon capture and producing biofuels have “delivered more advertising than results”, said Chris James, who established the hedge fund in 2020.

Oil majors in the US, the world’s biggest producer of oil and gas, are facing increasing scrutiny as President Joe Biden continues to push for a transition to cleaner sources of energy in a bid to lower emissions.

The Biden administration has frozen new exploration activities on federal lands and has brought the country back to the Paris Agreement. The US also plans to lower its carbon emissions by 50 per cent by 2030 from its 2005 levels.

In March, the US Securities and Exchange Commission rebuffed attempts by Conoco Phillips and Occidental Petroleum to dismiss shareholder motions on emissions targets, a move that will force them to detail plans to cut their “Scope 3” emissions. The changes come amid a broader political shift and a pivot to green energy under Mr Biden who ran on a campaign promise of delivering a $2 trillion clean energy overhaul for the world’s largest producer of oil and gas.

The US move to rejoin the Paris Agreement has struck a chord with young Americans who have become increasingly vocal about racial discrimination and protecting the environment. About 60 per cent of Americans are concerned about climate change, according to a Pew Research poll conducted last year, compared with about 44 per cent in 2009.

Around the world, particularly in the oil-producing heartland of the Middle East, the echoes of the wider green momentum are being heard loud and clear. While it is not practical to abandon the major source of revenue for their economies, Gulf Arab governments and their national oil companies have also gone about revising their strategies.

Countries in the Gulf realised after the price crunch of 2014 that their economies cannot solely run on the basis of trade in crude, an inherently volatile commodity. They began to lay plans to accelerate the diversification of their economies, although underpinned by a source of energy that was very much fossil fuel-based.

Countries such as Saudi Arabia and the UAE looked to branch into refining and more sophisticated chemicals, with a focus on the growing middle class in Asia. However, with the Paris Agreement, which looks to cap the global rise in temperatures to 2°C above pre-industrial levels, Gulf state oil companies have begun to embrace a different future.

The UAE has outlined a strategic initiative to achieve net zero by 2050 while Saudi Arabia, the world’s largest exporter of crude, has a longer timetable, with the goal set to be achieved by 2060. These commitments have also invited pledges from the oil companies, now working to rebrand themselves as energy companies, to set greener targets.

Saudi Aramco has pledged to become carbon neutral by 2050 while Adnoc plans to meet up to 100 per cent of its power requirements from solar and nuclear from January 2022.

The moves by the Gulf national oil companies are not only fitting with their national agendas but are also spurred by global environmental, social and governance standards.

Aramco and Adnoc are attracting pools of capital from the world’s biggest asset managers such as BlackRock, which has been the most prominent advocate of embracing climate change as a significant business risk.

While the Gulf oil companies have found themselves drawn to the global momentum on net zero, other large producers are struggling. Iraq, Opec’s second-largest producer, would need the support of the global community to move its economy away from fossil fuels and to adopt cleaner energy, according to the country’s Deputy Prime Minister Ali Allawi and International Energy Agency executive director Fatih Birol.

“An energy transition that fails to engage with fossil fuel-producing countries and their needs could have profound implications for regional and international security, and the stability of global energy markets,” they said in an opinion column published by The Guardian.

The country, which is estimated to have 8.4 per cent of the world’s proven reserves of oil, derives close to 90 per cent of government revenue from the sale of crude. Baghdad suffers from the vagaries of the oil markets, which affect its ability to finance several infrastructure and utility projects.

As the world prepares to bolster commitments for a greener planet, international energy companies and the global community must all come together to ensure all fossil fuel producers are prepared to embrace a new future.

Domino effect of pandemic creates new paradigms for sustainability ambitions and energy security

Rising crude and gas prices due to supply shortages and a bigger push for renewables are emerging trends after the Covid-19 crisis

The global oil and gas industry faced a much-needed realignment after the onset of the Covid-19 pandemic.

Oil demand plunged to historic lows, with prices for one crude commodity benchmark – West Texas Intermediate – even collapsing to sub-zero levels.

Demand evaporated as populations remained under lockdown to stem the spread of the coronavirus. Flights and ground transport remained suspended, leading to a complete collapse in demand for hydrocarbons.

What followed were clear skies and falling emissions, prompting several countries around the world to adopt the year 2020 as a benchmark for setting future emissions targets. This had a domino effect on the oil and gas industry. The sector was reeling from widespread job losses, budget cuts and bankruptcies. It soon had to deal with an existential challenge as well.

Big oil companies in the US, the world’s biggest producer of oil and gas, are facing growing scrutiny as the Biden administration continues to push for a transition to cleaner sources of energy in a bid to lower emissions.

Energy-related carbon emissions fell by about 7 per cent in 2020 as countries around the world introduced strict movement restrictions to contain the spread of Covid-19.

The drop is the steepest so far and is about five times the decline recorded after the global financial crisis.

Emissions of methane also fell by about 10 per cent in 2020, largely due to lower oil and gas production amid the pandemic, according to the International Energy Agency.

Electrification, which requires significant gas input, is set to double by 2050, with renewables meeting 80 per cent of requirements.

However, despite the increase in clean power generation, carbon emissions from other sectors such as aviation, shipping and haulage will be harder to reduce.

The recent supply shortages across Europe and Asia have prompted oil prices to rise to three-year highs and the price of gas to nearly double this year.

This development has the potential to slow the momentum of renewables and prompt oil and gas companies to press forwards with their post-Covid recovery plans.

The post-pandemic landscape for energy has also been characterised by low investment in fossil fuels, leading to multi-year rallies in the price of Brent and WTI, the main crude commodity benchmarks.

Analysts, including top US economist Nouriel Roubini, expect oil prices to touch $100 a barrel by the end of this year because of a lack of investment in the energy sector as the world focuses on the transition to clean energy sources in a bid to cut emissions.

Sustainable fuels will be an area of growing investment, however.

For example, Adnoc will explore the potential of new fuels such as hydrogen as it moves to reduce its carbon intensity over the next decade. It has also signed a joint study agreement with three Japanese companies to explore the commercial production of blue ammonia in the UAE.

To meet its emission reduction goals, Adnoc has used carbon dioxide captured by Al Reyadah Company, which sources gas from industrial factories in Mussaffah, to enhance oil recovery. It plans to harvest more carbon dioxide.

The momentum behind such initiatives has increased across the sector since the Covid-19 crisis began as companies re-evaluated their strategies and forecasts, and let go of traditional business models.

Another longer-lasting effect of the pandemic could be greater operational resilience and agility as a result of hybrid working practices.

Panorama, a digital command centre at Adnoc’s headquarters, now offers remote access to employees through a secure connection, providing real-time information across the company’s 14 subsidiary and joint venture companies, using artificial intelligence and data analysis to anticipate disruption and optimise production.  

During the pandemic, it fed data directly into the company’s crisis management centre, helping to predict, track and model Covid-19 infection and recovery progress within its workforce. The hub provides simulations and scenario planning for health and safety measures at site level and offers real-time business optimisation amid ever-changing scenarios.

With the help of AI, Adnoc was able to predict the peak of infections, in the middle of June of last year, to within three days’ accuracy.

Since then, Panorama has modelled more than 2,000 simulations to improve business continuity.

Industry at heart of hydrogen economy plans

Low-carbon element represents a potential route for Gulf countries to decarbonise their domestic sectors and create new export streams, Qamar Energy report says

Hydrogen, the most abundant element in the universe, is becoming more prominent as the next hot commodity to be favoured as Earth’s new energy source.

Hydrogen, which is only found compounded with other elements, is being promoted as the cleanest and most efficient alternative to fossil fuels in an increasingly decarbonised world.

Total associated investment in the sector will amount to $500 billion through to 2030 on the basis of 359 projects, according to the Hydrogen Council, an industry body.

About 18 per cent of global energy demand is expected to come from hydrogen by 2050, according to the council.

More than 30 countries have already issued hydrogen road maps as part of plans to decarbonise their economies and there are currently 228 large-scale projects under way in the sector.

Green hydrogen has become one of the most promising fuels among renewable energy sources after the onset of the coronavirus pandemic hastened the efforts of countries to decarbonise their economies.

Green hydrogen is one of the many different variants of the fuel classified on the basis of the source of energy.

It is produced from renewable sources. Energy from the sun or wind is used to power electrolysis, which splits the hydrogen and oxygen molecules from water.

The EU adopted hydrogen early, with the rest of the world currently playing catch-up and unveiling their own strategies.

In the EU, a centralised hydrogen strategy and an enhanced funding package have been tabled to build 40 gigawatts of internal market capacity and 40 gigawatts of neighbouring market capacity in North Africa and Ukraine.

In the Middle East, which is focused on the development and trade of newer forms of energy, hydrogen has begun to top investment agendas.

Earlier this year, the UAE formed a hydrogen alliance involving state-backed entities – Mubadala, ADQ and Adnoc. The alliance plans to create a hydrogen economy in the Emirates and is looking to transform the country into a significant exporter of blue and green hydrogen.

Blue hydrogen is generated through steam methane reformation, with the released carbon dioxide captured and then sequestered.

Hydrogen growth plans by the oil-exporting countries in the GCC could reap as much as $100bn a year by 2050, according to a report by Columbia University and Qamar Energy.

The UAE and Saudi Arabia are advancing plans to produce blue and green hydrogen and use existing hydrocarbon relationships to sell newer, cleaner forms of energy.

Interest in hydrogen is increasing because it is viewed as an alternative transport fuel and can power fuel cells in zero-emission vehicles, along with ensuring the high efficiency of such cells.

Hydrogen can also run in modified internal combustion engines and can be used in manufacturing as an alternative to fossil fuels.

Countries around the world are also considering blending hydrogen into e-fuels for aviation.

A conservative scenario for the growth of low-carbon hydrogen could lead to GCC countries meeting up to 10 per cent of European and East Asian requirements by 2050.

The region could generate between $30bn and $40bn in annual revenue from sales up to about 20 million tonnes of hydrogen.

A more ambitious target could result in GCC countries meeting 30 per cent of demand in Europe and East Asia.

Export volumes could reach 50 million tonnes, generating between $80bn and $100bn in annual revenue, the report said.

Gulf oil exporters have already focused on sales of blue hydrogen to countries such as Japan, with Adnoc signing three agreements to sell the cleaner fuel.

Hydrogen could also be used in the domestic market as regional countries look at continued decarbonisation across various sectors.

Low-carbon hydrogen represents a potential route to decarbonise domestic industry and create new export streams – whether for hydrogen directly or for hydrogen-derived industrial materials such as ammonia, plastics, synthetic fuels and steel, according to the Qamar Energy report.

UAE companies such as Emirates Steel, one of the largest companies in the country outside the oil sector, are looking to tap into green hydrogen for manufacturing.

Hydrogen is being used as a reducing agent in steel production, replacing the more polluting coal, which countries around the world are seeking to phase out.

Gulf national oil companies such as Adnoc and Saudi Aramco are looking to become top exporters of hydrogen.

Currently, Adnoc produces 300,000 tonnes of hydrogen annually for use in its downstream operations.

The company plans to expand its manufacturing capacity for the gas to more than 500,000 tonnes.

Aramco, which also sold volumes of blue hydrogen to East Asian customers, is interested in investing in green hydrogen.

The company will build a green hydrogen and ammonia project with the Modern Industrial Investment Holding Group and Intercontinental Energy, according to a preliminary agreement signed last month.

Saudi Arabia, which pledged to achieve carbon neutrality by 2060, is building one of the biggest green hydrogen projects in the world in Neom, the futuristic mega-city straddling the borders of Egypt and Jordan.

In 2020, Aramco shipped blue hydrogen produced in Saudi Arabia to Japan.

The hydrogen was shipped in the form of the more easily transportable ammonia for use in zero-carbon power generation in Japan, one of its top importers of crude.

Earlier this year, Saudi Arabia expressed its intention to become the “next Germany” in renewables.

The kingdom’s energy minister also floated the possibility of selling green hydrogen produced in the kingdom to Europe through pipeline “if the economics allow for it”.

Other companies in the region are also advancing plans to further the hydrogen economy.

Abu Dhabi National Energy Company, better known as Taqa, and Abu Dhabi Ports plan to develop a 2-gigawatt green ammonia project in the UAE, as part of efforts to develop the country’s hydrogen economy. The planned project will use a 2-gigawatt solar photovoltaic plant to power an electrolyser to produce green hydrogen that will, in turn, be processed into liquid ammonia. The green ammonia will be used in ships as bunker fuel. It will also be exported from Abu Dhabi’s ports through gas carriers.

The announcement by Taqa and Abu Dhabi Ports is one of many ammonia projects being developed in the UAE’s capital.

It follows plans for the development of a $1bn green ammonia plant by the Khalifa Industrial Zone Abu Dhabi.

Helios Industry, a private special projects company, will develop the plant in two phases alongside local and international partners.

The project will be powered by an 800-megawatt solar power plant within Kizad and is expected to produce 200,000 tonnes of green ammonia from 40,000 tonnes of green hydrogen.

In May, Adnoc announced the development of a massive blue ammonia project at its downstream centre in Ruwais as it looks to expand the UAE’s hydrogen economy.

It will have a capacity of 1,000 kilotonnes a year.

BP, Masdar and Adnoc will work together to develop low carbon hydrogen centres and decarbonised air travel corridors between the UK and UAE.

Together, the British multinational, clean energy company Masdar and Adnoc initially aim to produce 2 gigawatts of low-carbon hydrogen in the UK and UAE.

The intention is to expand as the project progresses. The British government’s overall target for hydrogen production is 5 gigawatts by 2030.

The hydrogen production partnership between the three companies could also lead to the first international investment in a low-carbon hydrogen project in Teesside, in northern England, supporting thousands of jobs and stimulating economic growth.

It is also expected to diversify and bolster local supply chains in both the UK and the UAE.