Experts have identified quick adaptation to market fundamentals as the key to success for oil and gas companies into the future.
The sector suffered a blow during COVID-19 as economic activity slowed and demand for petrol and petroleum products plummeted.
As economies recover and consumer confidence rises along with vaccine coverage, global energy consumption has begun to rise also.
The Dow Jones US Oil and Gas Index rose 46 per cent in 2021, and with that, renewed prospects for greater energy penetration.
But post pandemic, the global push for an energy transition has accelerated. The questions surrounding the role oil and gas will play remain, as governments around the world attempt to shift to net zero emissions.
According to the Environmental Protection Agency, combustion of oil and gas for electricity generation or transport is one of the leading causes of human-made greenhouse gas emissions.
Australia remains a major producer and exporter of natural gas and coal, and committing to net zero emissions has major implications for the economy and for our way of life.
Companies are facing mounting pressure from shareholders and policymakers to mitigate their environmental impact.
Technologies such as carbon capture and storage are maturing; however, they are still very expensive to deploy on a large scale.
Companies like Woodside, Shell, bp, BHP are investing in tree plantations to offset their footprint or buying carbon credits on the market to mitigate their impact.
Recently, the Commonwealth revised onshore and offshore decommissioning regulations, announcing that the liability for disused infrastructure lies with the initial asset owner.
Similar to regulations already in place in the northern hemisphere, Australia has expand trailing liability provisions to apply in a broader range of circumstances requiring the industry to become more environmentally responsible.
Wall Street research firm Bernstein Research said it still sees intrinsic value in the oil and gas sector despite it becoming a “sunset industry”.
Bernstein said it expects oil demand to grow by 3.5 million barrels a day this year compared with 2021, with prices at the lower end of a range of $US70-$US90 a barrel in 2022.
The Australian Petroleum Production and Exploration Association (APPEA) believes that new technologies and natural gas are the solution to reducing emissions.
Professor Claus Otto is the director of the Curtin University Oil and Gas Innovation Centre (CUOGIC).
Otto said that natural gas can be compatible with a low carbon future, replacing dirtier coal in electricity generation.
Curtin is investigating renewable energy sources, including the storage of hydrogen, the conversion of biomass into fuel, and the feasibility of widespread smart grids.
Otto believes natural gas can lead to widespread renewable energy development as the major limitation with renewable sources like solar and wind is that they are intermittent.
Natural gas is the logical backup for this intermittency, being the cleanest of the fossil fuels. Transition is difficult in the short term, and Otto believes oil and gas will remain necessary resources for the immediate future.
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