If there is one thing the oil and coal industries can agree upon, it’s that the solution to the current global energy crisis is more fossil fuels.
This was the consistent message from the two industries’ biggest annual gatherings in Asia, held this week in Singapore for oil and gas, and last week on the Indonesian resort island of Bali for coal.
It was the first time the Asia Pacific Petroleum Conference (APPEC) and Coaltrans Asia had been held in-person since 2019, and they provided platforms for the industry to assess the current state of regional and global energy, and chart what they see as the path forward.
While it’s to be expected that those in the industry will to at least some extent “talk their book” and promote what would be in their own interests, what the two events showed is a widening gap between the fossil fuel sectors and other players in global energy, such as policymakers, investors, bankers and utilities.
The Russian invasion of Ukraine on Feb. 24 has been the catalyst for players in the global energy industry to re-think priorities. For the oil, gas, and coal sectors what they see as the problem is perennial under-investment in new oil and gas fields and new mines.
The solution to them is obvious: if you want security of supply then you must invest more in ensuring more supply comes to market, and that there is the infrastructure to process, transport and store this production.
In other words, the solution to the current fossil fuel crisis is more fossil fuels, but this time just from more reliable countries and not Russia.
The increasing likelihood that Russian pipeline natural gas, coal and much of its crude oil and refined products will be lost to Europe underscores the need to boost supply from other countries, is the quick take on what both the oil and coal industries are thinking.
But there were also policymakers and financiers at the two events, and their perspectives were almost the polar opposite.
While all parties agree that energy security is the top concern currently, trumping climate change, the views on how to deal with the challenges were very different.
If there is one thing Europe in particular, but also energy-importing nations in Asia such as Japan, India and China, have learned from the disruption to global commodity markets and flows since the Russian attack on Ukraine it’s that relying on fossil fuel imports is now inherently risky.
European governments in particular will seek to move away from fossil fuels as fast as they possibly can, several policymakers and bankers said in off-the-record conversations at the events.
Investment dollars will accelerate into renewables such as wind and solar, backed up by batteries or other forms of storage such as pumped hydro, and perhaps even emerging technologies.
There is a sense of realism that for now Europe and many Asian countries are still beholden to fossil fuels, and have little choice to pay the current elevated prices in order to secure supplies, especially ahead of the northern winter.
There is also the realisation that the energy transition can’t be done so fast that they end reliance on crude, natural gas and coal for several years to come. But the point is the money is likely to flow at a faster rate into alternatives to fossil fuels.
The trick for the global energy sector is ensuring that enough investment is available to sustain crude, natural gas and even coal for the time period while renewables and other solutions are scaled up.
There is also the recognition that moving heating and light transport to electricity-based solutions doesn’t mean the end of oil and gas, which will still be needed for heavy transportation, petrochemicals and vital goods such as fertilizers.—Reuters