Predictable and sustainable regulation is critical for the energy transition, the heads of Repsol, Accenture and WestJet told delegates at the World Petroleum Congress today in Calgary, Alberta, as technology propels industry into new territory.
"We need regulator support, we need political support, we need social support, because we are part of the solution," Repsol chief executive Josu Jon Imaz said on a panel focused on the energy transition and technology.
"I like the word ‘transition,'" Imaz said, because "some people want to develop an energy revolution where the real target, the real objective is not decarbonizing the world, it is squeezing and getting rid of the hydrocarbons of the oil and gas sector."
"First of all we have to go on producing oil but reducing scope 1 and scope 2 emissions for operations. That is possible, thanks to technology," said Imaz.
The Spanish oil major is developing technology with Saudi Aramco to produce synthetic fuels using carbon dioxide and green hydrogen. While some strides have been made in Europe on regulation, the incentives for bringing environmentally friendlier products to market in the US are viewed as a good model by panelists, including Accenture chief executive Julie Sweet.
"The policy making needs to catch up" in some areas such as carbon capture, said Sweet. However, "it's a whole different conversation" now that the war in Ukraine has pushed energy security in Europe to the forefront with production of some cleaner products making strides forward.
Making SAF bets
Repsol expects production from its 250,000 tonnes/year biofuels facility on the site of its 220,000 b/d Cartagena, Spain, refinery before the end of the year, providing transportation fuels including those used for aircraft.
Such commodities, namely sustainable aviation fuels (SAF), are of interest to Alexis von Hoensbroech, chief executive of Canada's second-largest airline Westjet, who anticipates the SAF market growing to $500bn in revenues in 2050.
"Aviation is going to grow very significantly," said von Hoensbroech, who expects that "the last barrel of hydrocarbons produced on this planet are most likely to be burned on a jet engine."
"We need to transition into SAF," he said, noting work needs to be done so it can be used on a large scale as the largest producers are not Shell and Exxon, but small start-up companies. "There is an opportunity out there that is huge."
"We are at the brink of a very significant change in technology, especially on hydrocarbon production," von Hoensbroech said, indicating supply is the biggest challenge. "I sometimes call it a pharmacy product: it's produced in small quantities at very high prices."
"In many ways the oil and gas industry, it is both extremely difficult and extremely straightforward, until we get to the energy transition," said Sweet. But as oil and gas companies advance into new areas like EV charging, "it's the opposite of linear."
"The reinvention of your business model is key," said Sweet, indicating companies need to think differently and train their staff accordingly.
A "positive" approach from regulators is also important, said Imaz. "We need an open-minded regulator. Not promoting with a stick, but promoting with a carrot" to incentivize this transformation so companies like Repsol have a clear arena to invest in.
Green power produced for an electric vehicle in many European countries may be receive tax benefits, according to Imaz, but a producer of renewable fuels must pay the higher carbon tax as though they are producing oil and gas. "That is not fair," Imaz said.
