By Dr. Pramod Paliwal
The indicators are obvious that the world is getting impatient for a low-carbon future in numerous ways. Investors are now seeking more than just returns; they want reliable returns, i.e., returns that have a significant environmental, social, and governance impact on the sector as a whole. COVID-19 emergence that saw a collapse in oil demand and transition that is generally expected in years took only a few months.
The renewable energy technologies that were considered a threat to conventional oil and gas (O&G) companies have now become a part of their own portfolio. The industry as a whole is refocused on carbon management, making the goal of decarbonization part of their fundamental strategy, and also making them public. As traditional energy companies add renewable to their portfolio, network and communication technologies will need to keep pace with the phenomenon. If digital technologies were earlier crucial for modernizing extractive industries, their role is now getting redefined for above-the-ground energy production, transmission, and distribution.
Moreover, the trend towards electric cars and subsequent recharging infrastructure creation accentuates the need for network technologies aligning with the smart grid and EV info ecosystem.
As traditional energy companies add renewable to their portfolio, network and communication technologies will need to keep pace with the phenomenon.
The industry challenges
Let us look at them under different categories – the need to refocus and redefine portfolio strategy, improving competitiveness, and becoming technology ready for the green digital era.
Focus: Companies in the O&G sector have built their business models around the assets they own, and resources they can pull from the ground. They have to renew their focus on society and customers instead. It is about delivering solutions that meet customers' needs and address societal concerns.
Portfolio: So far O&G companies have managed massive portfolios of assets that were largely rigid. Operating successfully in 2021 and beyond will require companies to take a much more strategic look at their holdings and build agility and improvise asset classes as conditions dictate. The role of data analytics and subsequently that of ICT in bringing about operational efficiency will be important. The challenge of course is the speed as well as willingness to spend.
Competitiveness: I a world of shrinking demand, mastery of oilfield technologies is no longer an advantage. Much more valuable is mastery of digital technologies that connect the organization and optimize the end-to-end value chain. Gaining an edge in digital technologies is quite a challenge in its own way.
Technology readiness: With energy companies moving towards adopting Industry 4.0, the role of network and communication technologies has become more important. The challenge here would be to take quick moves with the earmarking of adequate investments and building competent teams.
The future outlook
While oil and gas will continue to be important sources of energy, the way these resources will be consumed and the expectations for how these resources will be extracted, refined, and commercialized will be completely different. To retain their mandate – both commercial as well as moral – to operate, companies need to embrace the structural shifts and meet the above challenges head-on. Energy efficiency continues to be a focus for energy companies and hence the role of ICT in sharing real-time information, analyzing, and taking corrective actions becomes crucial. The emerging Hydrogen ecosystem too presents opportunities for players in the network and communications sector.
With energy companies moving towards adopting Industry 4.0, the role of network and communication technologies has become more important.
The scenario in India presents a very interesting case study. As the world strives towards cleaner energy, India’s hunger for energy is set to overtake the EU by 2030, making it the third-largest energy consumer in the world. The country will continue to see three times increase in imports by 2040. It is fair to argue that India finds itself in an unusual position of having to pioneer a new low-carbon economy while also striving for growth. If India is able to achieve this, it will be a role model for other developing economies, especially in the African continent. Moreover, with solar energy poised to play a major role in decarbonizing the electricity sector, owing to optimization needs, network and communications technologies aptly synergize with this thrust.
Paliwal is Professor & Dean at the School of Petroleum Management, PDEU