The Paris Agreement on Climate Change once again made climate protection and CO2 emissions a topic of global discussion. But measures to reduce CO2 emissions have not only been influencing our business since Paris.
How will climate protection affect our industry? And what do oil and gas companies have to do to remain successful in 2030? These questions are being discussed at length in our industry. We are using this as an opportunity to explore the issue of “The Future of Energy” in a series of blog articles. Part 1 dealt with “The IEA’s view on the Paris Agreement on Climate Change”.
In this second Part, Christian Konrad explains how returning the focus to our core competency can mean a great step forward in the future.
What we’re really good at is producing, processing and distributing hydrocarbons. And this is precisely the core competency OMV can offer the market. We will still depend on hydrocarbons in 50 years, no matter whether they come from fossil or non-fossil sources.
Petrochemical Pricing, Feedstock & Business Development Manager, OMV Refining & Marketing
“Oil and gas companies are facing shrinking markets,” says Christian Konrad. But even in a world where the temperature is set to rise by just two degrees, he believes that fossil fuels still have a justifiable place. After all, we will not be able to shift global energy demand to renewables immediately. It will have to be done step by step. According to the International Energy Agency, the proportion of fossil fuels in the global energy mix will drop from the current 80 percent to approximately 60 percent by 2040. Declining market shares are tough, but a collapsing market is something entirely different.
The way he sees it, the markets will shift, regional markets will grow differently, and since the global population is growing along with energy demand, what he calls the “comparably convenient energy” from oil and gas will continue to have a future.
In the Upstream business, the Paris Climate Agreement will have less of an impact, according to Christian Konrad: “Because even if Europe and the US consume less oil, the global demand will continue. This is because the global economy is based on fossil fuels, and particularly the countries that still need to catch up economically will continue using oil.” he explains.
Things look different in the Downstream sector. When it comes to refineries and mobility, demand will decline considerably, at least in Europe. That is partially because the field is heavily dependent on EU regulations—driven by emissions regulations, energy efficiency, and the share of renewables in the energy mix.
If you want to stay in a declining market, you have to ask yourself: What are we good at? What is our core competency? For OMV the answer is pretty obvious: “What we’re really good at is producing, processing and distributing hydrocarbons.”
What does that mean specifically? Concentrating on products that can still be made from fossil fuels in a foreseeable period—such as in petrochemicals. The focus in the refining business in recent years has turned to producing products that retain their value, such as “intelligent plastics”. And this trend will continue to take hold. Ethylene and propylene are used in industrial chemicals and plastics products and as such form the basis of many products we use every day, like water bottles, computer housings, lightweight plastics for cars and planes, infusion bags, or underwater cables.
But the concept of “hydrocarbons” in no way has to be limited to “fossil hydrocarbons”, explains Christian Konrad: “Nowadays hydrogen is mostly still produced from natural gas, in the future it should be made directly from renewables.”
In addition, OMV is operating a pilot project in a wind2hydrogen plant in Auersthal (Austria). Electrical energy is generated from wind in this plant, then transformed into hydrogen, after which it can be stored or transported in the existing gas network. For example, it can go to an OMV hydrogen filling station to be used on the road. Future innovation is also underway at Cambridge University, where OMV is supporting the team of Austrian professor Erwin Reisner. They are researching a method that uses the energy of the sun to produce hydrogen.
Hydrogen is an element we have known for a long time. Around 50,000 tonnes a year are produced in the OMV Schwechat Refinery alone. “And this is precisely the core competency we can count on and offer the market. Our economy and our life will still depend on hydro(carbons) in 50 years, no matter whether they come from fossil or non-fossil sources.” says Christian Konrad.