January 2020 /// Vol 241 No. 1

Columns

Editorial Advisor's perspective

2020: An opportunity to demonstrate leadership

Richard Clark, NOIA

The year, 2020, promises to be an interesting for the energy industry. Beyond the usual opportunities and challenges associated with managing our operations and adapting to oil price volatility, we will have to grapple with an increasingly intense public debate about our industry’s response to climate change, as well as calls for greater transparency regarding environmental, social and governance (ESG) performance. In one way or another, these twin pressures will touch every company in our industrypublic and private, offshore and onshore, upstream and downstream. 

Efforts already underway. The good news is that our industry is already tackling climate change and ESG performance on many different fronts. Most, if not all, companies along the hydrocarbon value chain are taking steps to improve efficiency, lower costs, and reduce emissions. Some are developing carbon capture technology and supplementing the power needed to produce oil and natural gas with other sources, such as wind and hydroelectric. A few are using artificial intelligence and machine learning to improvboth safety performance and operational efficiency. Others are donating seismic data to local communities and research institutions to help strengthen coastal resiliency efforts. These efforts should be commendedof course, but there is much more we can and should doespecially as climate change and ESG performance become a greater focus for investors, governments and the communities where we live and work. 

Retaining a critical role. Our industry will continue to play a critical role in the energy transition that is already underway. Around 1 billion people (roughly 13% of the world’s population) still lack access to electricity, and global energy needs are expected to increase approximately 25% by 2040. The International Energy Agency (IEA) estimates that demand growth will require more than $2 trillion of investment in new energy supply per year. This will be particularly driven by developing countries, where access to affordable and reliable energy can transform nations by creating economic opportunity that drives social progress. But this has to be done the right way.  

Such is the case, for example, in Mauritania and Senegal, where BP and Kosmos Energy are partnering with both national oil companies to develop offshore natural gas resources for the benefit of the people. They are working to do so in as innovative way as possible, to help lower the carbon emissions of the activities. 

The project represents a very competitive way to deliver gas for both export and domestic power generation, a critical economic driver for both countries. Successful execution of the development could establish the countries as reliable suppliers of lower-carbon energy to the world for the next 30 years. Combining this approach with improving the provision of renewable energy in country is the right way forward. 

Energy mix/economics. The energy mix required to meet demand will surely evolve over time to incorporate ever more renewables, but hydrocarbons, especially natural gas, will play an important role for many years to come. The energy produced by the oil and gas industry delivers the necessities of modern lifeheating our homes, lighting our workplacesfueling our cars, and powering the smartphones and computers that keep us connected.  

The hydrocarbons needed to meet demand today and tomorrow will have to be “advantaged”economic under abundant supply and price pressure, as well as at the lower end of the spectrum in terms of carbon intensity. Not every barrel is the same. For example, the average carbon intensity of production offshore Gulf of Mexico is significantly lower than that of the majority of production onshore. Companies with the best assetslow cost, lower carbon intensitywill win, provided they can demonstrate that they are taking the right steps in terms of ESG performance.  

Tackling the dual challenge – providing more energy with fewer emissions – requires action from all parts of society: governments, civil society and the private sector, and companies in our industry must grab hold of the opportunities and challenges that the global energy transition presents to our business. 

The Authors ///

Richard Clark RICHARD R. CLARK is Chairman of NOIA and President of Kosmos Energy Ltd.’s Gulf of Mexico business unit. More than 25 of his 40 years in the energy business have been focused on the deepwater Gulf of Mexico. In 1996, he was one of the founders of Mariner Energy, Inc., serving as Executive Vice President and a board member. In 2004, he was a founder of Deep Gulf Energy and served as President of the company, from its inception until it was purchased by Kosmos in September 2018. Mr. Clark earned a BS degree in mechanical engineering from the University of Tennessee at Chattanooga. He began his career with Shell Offshore in 1979.

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