Economic View

On the oil and gas industry’s transition to sustainability

How do you assess the impact of the Covid-19-induced crisis on the natural gas industry?

MARK LOQUAN: The Covid-19 pandemic erupted during a challenging period for the oil and gas industry. From a business perspective, energy prices were already in a downcycle prior to the pandemic due to a surplus of output worldwide. Prices then fell further as a result of reduced demand during the pandemic. 

Covid-19 compelled change. Corporations needed to address the situation and respond to short-term disruptions while continuing to focus on longer-term goals such as transitioning to a green agenda and adopting new technologies.

At NGC our first response was to roll out business continuity plans to guarantee supply and ensure employees were safe. In addition to putting in place the necessary measures for essential employees who had to be present in the workplace, non-essential staff were shifted to a work-from-home programme that resulted in no disruption to the business. As an industry we are now working in a more virtual space with digital tools – a planned shift which we have had to accelerate.

The oil and gas industry had already incorporated forward-looking strategies into its agenda before the pandemic, including digitalisation, green practices and a structural change to address oversupply, and these moves will continue over the long term.

What efforts can be made along the value chain to reduce carbon emissions?

LOQUAN: Prior to the pandemic, climate change was already at the core of the industry’s strategy, and it will be in the spotlight again once the pandemic is over. Tackling environmental concerns is a matter of how we position ourselves for the future. Major companies have already announced carbon-neutral strategies in the run-up to 2050, and T&T has taken steps in that direction with initiatives such as the memorandum of understanding between NGC and the University of T&T to help realise national commitments under the Paris Agreement and start working on climate-related projects.

Efforts from the supply side include reducing emissions through energy efficiency and clean energy technologies. In order to mitigate the effects of climate change, the installation and use of renewable energy and more efficient energy-consumption technology and infrastructure are also crucial. Increasing the proportion of renewable generation in the country’s energy mix from 15% to more than 60% in the coming decades is of the utmost importance. 

On the demand side, 2020 was a volatile year, with cargo shipments cancelled and international trade disrupted. This lowered carbon emissions across the board, albeit temporarily. Forward-looking efforts include more efficient energy use with the help of technology, combined with legal requirements on energy equipment, reporting methodologies, labelling of appliances and consumer electronics and education programmes. 

In what ways has the pandemic shifted the growth outlook for oil-dependent industries? 

LOQUAN: The pandemic has accelerated the consolidation of the oil sector, with reductions in capital spending for exploration and a deeper focus on making investments that are relevant for the future. In fact, the push for better cash flow management throughout the pandemic has had a positive impact in terms of efficiency and project execution, and – despite difficulties building up the necessary workforce – there were no significant delays in project execution.

In terms of petrochemicals, T&T has traditionally been a major supplier of ammonia and methanol to the US. However, prior to the pandemic, there was a large shift under way in the industry due to the gas revolution in the US: new plants were being installed and the amount of product exported from T&T to the US was on a downward trajectory. 

When the pandemic hit the economic crisis led to subdued demand from automakers, which are key consumers of petrochemical products. An increase in freight costs also negatively affected the petrochemicals industry, which was already operating with very narrow margins.

Beyond T&T, the crisis affected other relevant producers of petrochemicals, such as China, Malaysia, Indonesia and Chile. Stakeholders in those countries responded by taking plants offline, extending turnaround times, rescheduling maintenance and making decisions based on transition periods in the industry.