Evolution is underfoot in the 160-year-old oil and gas industry. It’s a slow change spurred on by digitalization, and the efficiencies and opportunities it creates, as well as a call to action for our climate. The energy sector is responding by turning its attention toward a sustainable future.
Responsible investment adds to energy transition pressure
In addition to the European political pressure, the financial community is also taking a stand. More investors are focused on the ESG side of the business world, issuing mandates stating that responsible investments are the way forward. The world is watching the decisions of the oil and gas players, prompting the European companies to take action as they work to reduce their emissions and make the transition to renewables to be more palatable for the responsible investors. The U.S., however, is not feeling the same level of pressure.
One year ago, I relocated to the U.S. to run the North American division of Norway-based Cognite, and I’ve experienced firsthand the energy, enthusiasm and burn for innovation that runs strong here. I don’t feel the same sense of urgency in the U.S. to transform the oil and gas business. There isn’t an immediate regulatory demand, there are little to no incentives from the government and the case for renewables still doesn’t seem to fully sway our friends in fossil fuels.
O&G companies need to play the long game
Most companies acknowledge that a transition to renewables isn’t an instantaneous, money-in-the-pocket kind of thing. It’s a bet, a long-term one at that, on the future. It is one that requires foresight and some willingness to invest, based on a belief that it will pay off eventually.
If I look back on some of the greatest advances in American history, the boldest ones have resulted from a greater need, for the greater good. They haven’t resulted because the government said so. To me, this is what defines America. Innovation that moves people forward. And this is what I believe will happen in the oil and gas industry.
Offshore wind is more tenable for O&G investment
For European oil and gas companies, offshore wind has been a natural next step. Companies are discovering that their current offshore infrastructure has value for generating this particular type of renewable energy, making it an easier investment to justify. There are several areas of crossover, particularly in engineering and in the product and project management areas. These areas can be easily applied to budding offshore wind divisions, even within traditional oil and gas companies.
In addition to exploring wind, we are also seeing that European oil and gas companies are having success in reducing their own emissions through the increased digitalization of their operations.
Insights show where energy losses occur
By connecting the billions of datapoints from across an oil and gas operation, companies are able to extract insights that tell them where they are suffering energy losses, for example. Cognite estimates that through the use of data alone, companies are able to cut energy loss by approximately 10%, which is equivalent to more than 13 Bkg of CO2 per year, a number which most companies will happily report.
Transparency through reporting in demand
There is a growing expectation in Europe, as well as in some parts of the U.S., for increased transparency across the oil and gas industry. This increased scrutiny stems from greater climate awareness, forcing companies across the board to be open about their emissions and how they are working to reduce them. As Peter Drucker says, “If you can’t measure it, you can’t improve it.”
From health and safety to carbon emissions to measures taken to reduce climate impact, the industry trend is to be more open. This is a positive trend in my opinion, because reporting forces us to confront where we are lacking and to do something about it.
Reflecting on U.S. history, the country isn’t one to stay behind for very long. In the energy transition, there’s much to be learned from European counterparts that have been pushed a bit harder in these early days. But to truly take the next step and possibly even surpass Europe, the American oil and gas industry needs to forge its own path ahead. This means taking the best from Europe and coupling that with good, old-fashioned American innovation and rapid advancement.
The energy transition is happening whether we like it or not.
It is slowly but surely accelerating as governments gain awareness and use regulation to ensure that we are collectively able to slow climate change.
I may be a bit biased, given my role working in the U.S., but I have no doubt that the biggest transformations in the oil and gas industry will take place right here in America, the place where some of the most life-changing innovations have been born.
Let’s learn from Europe and take it even further.
About the author: Francois Laborie is president of Cognite North America, overseeing the company’s expansion and operations in the U.S. and Canada.
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