When we talk about artificial intelligence (AI) today, it can often be spoken of with a dystopic undertone. However, there are three ways, according to the Harvard Business Review, in which AI can support a business: automating processes, analysing data, and engaging with customers or employees.
In the oil and gas industry, the first two examples are most immediately relevant. Machine learning in energy trading is not a novel concept – with a fluctuating and volatile market, the ability to predict price trends using complex coded algorithms, for example, has been part of the trading strategy for many large oil producers and traders.
Beyond the usefulness of AI in a trading office, there are also benefits to deploying AI in the upstream and midstream. One of the avenues through which investments are being made in AI is for the prospection of oil. This is technology where robots can assess drilling sites and predict well performance, saving time and capital expenditure.
AI can also be used to predict the duration of refinery shutdowns thereby reducing millions of dollars that unplanned outages tend to cost the oil industry. Refiners can also take advantage of AI analytics to anticipate potential mechanical failures before they even occur.
There is also the optimistic outlook that the use of AI methodologies can increase efficiency in the chain, thus indirectly reducing carbon emissions in the long run.
In the natural gas industry, AI is being used by producers to lower methane emissions. One such data company is Project Canary which differentiates gas. Natural gas that is produced with lower emissions can be labelled differentiated, low-carbon, or responsibly-sourced, which makes it more appealing to environmentally-conscious consumers.
Having the right AI capabilities, however, is instrumental for companies to reap the benefits of machine learning. Companies must also redesign their day-to-day operations and be equipped to implement the automation. Ultimately, cognitive technology will change the landscape in which we as an industry operate.
Beaman, Jeremy. “Power of AI: Oil and Gas Sector Drills down into Methane Emissions Data.” S&P Global Commodity Insights, S&P Global Commodity Insights, 24 Oct. 2023, www.spglobal.com/commodityinsights/en/market-insights/latest-news/natural-gas/102423-power-of-ai-oil-and-gas-sector-drills-down-into-methane-emissions-data.
Sharma, Gaurav. “How Multibillion Dollar Investments in AI Are Driving Oil and Gas Sector Innovation.” Forbes, Forbes Magazine, 5 Oct. 2023, www.forbes.com/sites/gauravsharma/2023/08/14/how-multibillion-dollar-investments-in-ai-are-driving-oil-and-gas-sector-innovation/?sh=1f18c4a71ff7.
It is fair to say that climate change does not discriminate based on country – it is a global issue, although poorer nations tend to face greater effects from emissions. The Paris Agreement is a legally-binding international treaty, the world’s first in the field of climate change, bringing virtually all nations together to fight climate change. So significant and important is the agreement that US President Joe Biden recommitted to it on his first day in office in January 2021.
Entered into force in 2016, goals of the Paris Agreement are to:
Limit global warming to 1.5°C by the end of the 21st century and to keep them well below 2.0°C above pre-industrial levels. Crossing the 1.5°C mark would put the world at risk of even more severe impacts on climate change and even more extreme weather.
Limit greenhouse gas emissions to the same levels that trees, soi, and oceans can naturally absorb between 2050 and 2100. This is what we otherwise call “net zero”.
For the Paris Agreement to work, countries must submit their nationally determined contributions (NDCs) in which they specify the actions they will take to reduce greenhouse gas emissions and build resilience to adapt to rising temperatures. Every five years, countries are expected to update their NDCs. Subsequent NDCs are meant to be more ambitious than the previous ones. Countries are also encouraged, but not required, to submit long-term strategies.
Developing countries produce more than half of today’s greenhouse gases but are limited by finances and capacity. These countries have been demanding funds for loss and damage incurred from the effects of climate change. Developed countries are therefore expected to take the lead in providing financial assistance (or climate finance) to more vulnerable countries and support them in their emissions control and adaptation efforts. At COP27 in 2022, countries agreed to setting up a fund, and at COP28, US$700m was committed.
However, the strength of the Paris Agreement, being an all-nations cooperative effort, is dependent on its many participants to remain committed to the joint task. Scientist also argue the need to assess the progress made toward its goals every year.
“The Paris Agreement.” Unfccc.Int, United Nations Framework Convention on Climate Change, unfccc.int/process-and-meetings/the-paris-agreement. Accessed 18 Nov. 2023.
“The Paris Agreement.” United Nations, United Nations, www.un.org/en/climatechange/paris-agreement. Accessed 18 Dec. 2023.
“The Paris Agreement.” MIT Climate Portal, climate.mit.edu/explainers/paris-agreement. Accessed 18 Nov. 2023.
Stallard, Esme. “Why Is the Paris Climate Agreement Still Important?” BBC News, BBC, 27 Nov. 2023, www.bbc.co.uk/news/science-environment-35073297.
Poynting, Mark. “What Was Agreed on Climate Change at COP28 in Dubai?” BBC News, BBC, 13 Dec. 2023, www.bbc.co.uk/news/science-environment-67143989.
The global population is facing a critical time in climate policy. Climate change has evolved from being a distant and abstract concept to a tangible reality. In 2023, we experienced the highest temperatures in 120,000 years. The world also saw the worst wildfires in recorded history, the most notable being in Canada, Greece, Spain, and Hawaii.
The existing energy framework we have was built for a different climate. Today, this system is no longer sufficient because of rising temperatures and more extreme weather – very hot summers and blistering winters. Hence, the world needs to find a balance between managing the existing levels of climate change and trying to hold off the rate of global warming.
The last few decades have seen the world rapidly develop clean energy technologies like wind- and solar-generated power. Electric cars are also accessible. We also have international frameworks in place like the Paris Agreement and the annual United Nations Climate Change Conferences which we colloquially refer to as COP. Energy transition has become a major talking point but, aside from being a popular topic, it is something the energy industry has come to take seriously.
In fact, oil and gas companies have been investing in renewables since the 1980s. Today, oil companies are committed to investing billions of dollars in energy efficiency. These companies are actually very well placed to lead the energy transition: they already have experience with large-scale projects, storage and transportation, and a deep understanding of the energy needs of consumers.
What we as the global population also need to consider is the affordability of clean energy for poorer countries. Roughly US$1 trillion is needed in investments in the power sector for developing countries to meet their climate goals. Demetrios Papathanasiou, Global Director of Energy and Extractives at the World Bank, says that “poorer countries are stuck in a vicious cycle where they pay more for electricity, cannot afford the high upfront cost of clean energy, and are locked into fossil fuel projects. In essence, they are paying a triple penalty for the energy transition.”
Furthermore, many of these countries do not have the strong governance that is so fundamental to signal to investors that the country is suitable for private investment into its clean energy transition.
Even in developed countries at the household level, high upfront costs of clean energy solutions make them inaccessible for those with lower incomes. Despite the long-term promise of electricity bill savings, making that switch can cost two-thirds of someone’s yearly salary.
The global move towards clean energy therefore requires solutions from governments and large corporations to uplift those who cannot afford it. At Cathay Petroleum, our teams are consistently researching our options to invest in clean energy with a view to support the global energy transition.
Jacob, Julia, and Dan Peck. “Record-Breaking Wildfires Have Occurred All over the Northern Hemisphere during 2023, New Report Finds.” ABC News, ABC News Network, abcnews.go.com/US/record-breaking-wildfires-occurred-northern-hemisphere-2023-new/story?id=103169036. Accessed 19 Dec. 2023.
“‘I Wasn’t the Obvious Choice’: Meet the Oil Man Tasked with Saving the Planet.” The Guardian, Guardian News and Media, 7 Oct. 2023, www.theguardian.com/environment/2023/oct/07/meet-the-oil-man-tasked-with-saving-the-planet-cop28.
International Energy Agency (2023), World Energy Outlook 2023, IEA, Paris https://www.iea.org/reports/world-energy-outlook-2023, License: CC BY 4.0 (report)
Kienzler, Clemens, et al. “How Oil and Gas Companies Can Be Successful in Renewable Power.” McKinsey & Company, McKinsey & Company, 27 Feb. 2023, www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/how-oil-and-gas-companies-can-be-successful-in-renewable-power.
“Breaking down Barriers to Clean Energy Transition.” World Bank, World Bank Group, 18 May 2023, www.worldbank.org/en/news/feature/2023/05/16/breaking-down-barriers-to-clean-energy-transition.