CERAWEEK: Fossil fuel still has room to grow even as the energy transition mounts

North America has time left for fossil fuels, maybe 80 years or more, even as oil and gas' share of the energy mix recedes amid the energy transition, a panel on decarbonization said March 18.

The vast effort needed to cut back on emissions is creating new technologies, which in turn requires more sophisticated computing and related products to meet goals, Bart Cahir, ExxonMobil's senior vice president-upstream unconventionals, said on the first day of the CERAWeek by S&P Global energy conference in Houston.

"As we think about the future, we think of continued innovation and technology," Cahir said. "So, we project North America will continue to grow into the next decade."

Natural gas may have an even longer tail as a viable and widely used transition fuel in a well-supplied North America, said Gordon Huddleston, president and partner at Dallas-based Aethon Energy, a private investment firm that manages and develops North American assets.

"When we think about where the future is going, gas still has a very large component out to 2100," Huddleston said. "There's always the potential novation and disruption."

Moreover, "high-carbon intensity assets like oil and gas in California are changing to create a more desirable product mix," he said.

Kris Smith, vice president and chief financial officer for Canadian oil sands developer Suncor Energy, noted his country is sitting on about 170 billion barrels of crude from oil sands, but that large investment required to extract that resource forces a long-term thinking.

"We have to see where the puck is going," Smith said.

Efficiency gains

At the same time, the long-term and large investments required for such a sheer amount of sophisticated products and services requires an increasing level of efficiency, said Luca Zanotti, USA president for tubular goods supplier Tenaris.

And efficiencies don't necessarily mean less business with a great deal less of traditional activity, Zanotti said.

"Working together with industry, we've been able to stabilize [our product lines], and in the end that means efficiency," he said. "For example, in 2019 we had almost 1,000 rigs going, and pipe consumption was 4.8 million feet. In 2023, there were more or less 650 rigs running and consumption went down to 4.6 million feet."

Tenaris in 2019 needed to offer 200 different products, but currently it can do the same on a "much larger base" with 80 products, Zanotti said.

Those efficiency improvements come about from policy changes, as well as prices and consumer choices, Cahir said. Most of E&P operators, particularly the larger publics, have vastly lowered their emissions. which has resulted in lower costs.

Cahir said ExxonMobil has reduced emissions in the Permian Basin 70%-80% and eliminated all pneumatics there, with other companies achieving similar emissions goals.

By raising its profile in the Permian with a couple of large acquisitions in recent years, including the 2017 purchase of companies owned by the Bass family in Fort Worth, Texas, and its pending purchase of Pioneer Natural Resources for $59.5 billion, ExxonMobil has seen and anticipates further efficient well results and "creates more value per section," Cahir said.

""We approach it in a way to drive our cost of supply down," Cahir said. "And it provides optionality and risk. stance, during the pandemic, when demand was slack we could pull back ... until such time as we could come back online. That gives us a bit more flexibility that we like; it has hidden value in the asset space."

An invisible advantage

Zanotti said increasingly sophisticated technology also has safety features that might be an invisible advantage that not only reduces downtime but lowers the man-hours required to do tasks.

"When we ship a pipe to a rig, or to a well, the pipe carries the most advance manufacturing processes," he said. It carries a full set of data that describes the features of the pipe.

"For example, there are people that go to a rig to measure the pipe," he added. "But that's no longer necessary because the data is coded into the pipe body. This is the kind of activity we've been working around the pipe. We're trying to bundle [services around] the pipe that aim at unlocking value and providing efficiencies to the operator.