Oil and gas players seem to be forgetting the end goal of energy transition

“HALF-BAKED alternatives”. That is how the president and chief executive officer of the world’s biggest oil and gas company described some of the cleaner energy sources that could potentially replace conventional fossil fuels.

In his address at the recent Singapore International Energy Week (SIEW), a five-day conference focusing on how the energy sector can gradually transition to be less carbon-intensive, Saudi Aramco’s Amin Nasser pointed out that the cost of replacing fossil fuels with renewables is simply too costly – and therefore, unrealistic.

Instead, he argued, there should be continued investment in these “crucial conventional sources” for emerging markets.

Some eyebrows have been raised that Aramco – a single company estimated to be responsible for more than 4 per cent of all emissions since 1965, and has been ranked as having the worst climate targets among major listed oil and gas companies – is the main sponsor for a conference focused on decarbonisation.

While one can argue that the inclusion of oil and gas players – especially the biggest one – is crucial to bring about a meaningful energy transition, being given a platform on which to call for more financing in the sector might be seen as legitimising the continued use of some of the world’s biggest pollutants.

And it was not just Nasser talking up the importance of fossil fuels in the conference on decarbonisation.

Joseph McMonigle, secretary general of the International Energy Forum, said that the lack of oil and gas investment in primarily Europe – prior to the ongoing Russia-Ukraine war – was a policy misjudgement that was exacerbated in the rest of the world, leading to the energy crisis in 2022.

Takao Tsukui, executive vice-president responsible for international sales and marketing at Mitsubishi Power, noted that the company is receiving more orders for combined-cycle gas turbines as natural gas has gradually been dissociated from coal – the most carbon-intensive form of fossil fuel.

Several panelists – some of whom have stakes in the oil and gas sector – were bullish about the prospects of natural gas. They believe that the proportion of natural gas in global energy supply will go up by 2035, given its stability as a dispatchable energy resource, as opposed to the intermittency challenges of renewable energy sources such as solar and wind.

There has been a reckoning among financiers and energy sector players on the importance of natural gas as a transition fuel, as emerging markets make the gradual move from coal to renewables.

Gone are the days where the focus was on the immediate phase-out of the entire fossil fuel industry.

This move to a more realistic approach towards energy transition has been welcomed, considering that the energy demands in emerging markets – especially in South-east Asia – are projected to increase due to their expanding economies.

But while the tap should not be switched off immediately, there is a danger that these markets become so reliant on natural gas that they lose sight of the pace and scale needed to eventually switch to renewable sources.

While natural gas is less carbon-intensive than coal, it is still a fossil fuel.

An added danger to the growing acceptability of natural gas is how transition finance – meant to be deployed for the decarbonisation of carbon-intensive sectors – could unintentionally be used to extend the longevity of this pollutive sector.

To complicate matters, conversations around energy transition get wrapped up in the notion of a “just transition”. This refers to a philosophy that advocates for the reduction of carbon emissions while minimising its impact on the economy and the people employed in the fossil fuel sector.

There has been criticisms that the “just transition” – which was also bandied about quite often during the conference – might become a crutch for energy companies and banks to slow down the pace of climate action. Nasser had, in his pitch for more oil and gas demand, said that the current approach to energy transition has not been equitable for emerging markets and developing economies.

At some point, these justifications look more like excuses than valid reasons.

For oil and gas companies to display their seriousness in natural gas as a transition fuel – and nothing more – they should be setting a sunset date for the use of this energy source and finding ways to decarbonise it, such as through carbon capture and storage technologies.

Granted, policymakers have also not made it easier by enacting policies to level the playing field between the fossil fuel sector and renewables.

On top of a lack of a carbon price – whether through an emissions trading system or a carbon tax – many continue to subsidise the polluting industries.

Still, it seems disingenuous for oil and gas companies to call for more financing without recognising the financial benefits they have accrued over the last few decades while polluting the environment.

Sure, there is no one-size-fits-all solution to decarbonisation, as many panelists said at SIEW. Emerging markets have their own unique challenges, and therefore should have their own unique solutions.

But emerging markets will also bear the brunt of the impact of climate change if their energy sectors continue to justify the use of natural gas beyond the short term.