Rather than representing a lost year, 2020 provided a learning opportunity for oil and gas companies, according to participants in a panel at the Rio Oil & Gas 2020 digital event in Brazil.

“I disagree with the statement that this was a lost year. For the energy sector, it was a year of uncertainties and challenges, but with a lot of opportunities opening up ahead of us," said Andre Araujo, head of Shell’s Brazilian unit, while moderating a panel on the role of the oil and gas sector in the energy transition.

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"We probably learned in eight months what would normally have taken us years."

An entity with a bird's eye view of the oil industry's place in the energy transition is the Paris-based Oil & Gas Climate Initiative (OGCI), made up of 12 active international and national oil companies.

Net-zero commitments

“Despite all the economic uncertainty we have faced this year, we have seen tremendous declarations of commitment toward net-zero [carbon emissions] goals by countries and cities and companies,” said OGCI vice-president for policy and strategy, Julien Perez.

Formed with the objective of bringing skills sets to kick-start low-carbon solutions and accelerate transition towards net-zero goals, the OGCI has already identified much to be done by the sector.

Defining terms and setting short-term targets for long-term goals were identified as starting points.

“This includes questions about how we can work together collectively to address and, in the case of Scope 3 emissions, this means asking questions of the consumer,” Perez said.

Scope 3 emissions refers to emissions from oil and gas companies' products through use by end users.

'Unique combination of skills'

“The new business model requires energy companies to guide their customers through energy transition, and this probably means following a similar path as the waste industry toward more carbon management,” he added.

Strengths and “unique combinations of skills” that oil companies can bring to the table include long-term expertise in energy markets, an international footprint, financial muscle and capacity for complex projects with multiple stakeholders, Perez noted.

The oil industry often works in remote offshore areas, offering accelerated solutions in sectors such as offshore wind and carbon sink, he added.

“Today there is global recognition that the energy transition will cost in the short-term for first mover but then brings benefits which outweigh initial costs,” Perez said.

Rewards for transitioning to the debt-financed zero-emission projects include licence to play with different stakeholders and secure and acceptable cost of long-term capital, according to OGCI studies.

'We know the path we have to follow'

Perez said the lessons learned in 2020 went much further than the oil sector as the drastic reductions in emissions caused by Covid-19 lockdowns offered an insight into the “pathway” of the more optimistic target of limiting global warming to 1.5 degrees Celsius.

“Of course we don’t want to do that the way it was done in 2020, because it was imposed on us, but we know the reduction path we have to follow,” Perez sated.

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A growing number of companies have now stated zero emission targets including OGCI members BP, Repsol, Shell, Eni, Equinor, Occidental Petroleum and Petronas, and this trend was described by Perez as an “absolute game changer.”

He also noted, citing data from Climate Action Tracker, that 127 countries responsible for 63% of emissions are considering, or have adopted, net-zero targets.

“At the COP26 (climate change conference) perhaps all countries will have a net-zero plan,” he mused.