Illustration; Source: U.S. Energy Information Administration (EIA)

2023 state of energy in review: Gas and green shift as centerpieces of future mix

Following the global energy crisis, which struck the world like a bolt of lightning in 2022, energy security reigned supreme on countries’ energy agendas during 2023. While some made headways in enriching their energy mix with more renewables and low-carbon fuels, others left no stone unturned to shore up all available sources of supply to reinforce their energy arsenal. Aside from renewable energy, a dash for natural gas, especially LNG, also took a prominent spot in this quest to strengthen the security of supply.

Illustration; Source: U.S. Energy Information Administration (EIA)

In the wake of the so-called weaponization of gas, which came as a result of the Ukraine crisis, climate campaigners and environmental organizations were in high hopes that these events would push the future of energy supply into the arms of clean energy. While renewables were on the rise, especially in the European Union (EU) and the U.S., fossil fuels did not budge from their dominant position in the energy pyramid. They still ran the energy mix with the lion’s share of 80% while renewables controlled 20%. On the global scene, energy security and sustainability continued to imbue the energy agenda throughout 2023.

The EU imposed sanctions on the Russian Federation in the aftermath of the Ukraine crisis in the hopes of bringing the largest country in the world by area to heel and ending the conflict. While the effectiveness of these sanctions might still be open to interpretation, they did spur the rewriting of the global oil map. With the demand for black gold still going strong despite predictions of peak oil demand, Europe had not curbed its consumption, instead, it replaced Russian oil barrel for barrel by getting its hands on more oil imports from a pool of other producers, such as the U.S., Saudi Arabia, Brazil, and Angola.

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With the energy price shocks that marked 2022 deeply entrenched in their minds, policymakers sought to replace coal by securing more gas, as the lowest emission fossil fuel, in a bid to meet the growing energy demand and propel their countries’ energy transition forward. In February 2023, ministers responsible for energy from around 40 countries took part in an International Energy Agency (IEA) Ministerial meeting on gas markets and supply security. The ministers concluded at the time that clean energy transition and increasing stability in the global LNG market, specifically security of supply and price stability, was a common task for all gas-producing and consuming countries in the world.

In addition, they highlighted the need to address the immediate global energy crisis, while still meeting the Paris Agreement targets, including pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels by accelerating clean and sustainable energy transitions to achieve global energy security and climate goals. The importance of galvanizing efforts to tackle the climate crisis was hammered home further during the ‘Major Economies Forum on Energy and Climate,’ convened by the U.S. President, Joe Biden, highlighting the critical areas where immediate action was needed to bring down emissions and the need for stronger policy action.

Net zero and current energy landscape: Bridging the divide

Based on the reports issued during 2023, the gap between net-zero dreams and energy industry reality had widened further. A report from July 2023, prepared by the Energy Industries Council (EIC) pointed out that oil and gas segments, including upstream, midstream, and downstream, had the highest final investment decision (FID) rates, averaging around 20% for projects with start-up dates between 2023 and 2028. In contrast, renewable energy and energy transition technologies had much lower FID rates. In line with this, offshore wind stood at only 8%, hydrogen at 3%, carbon capture at 2%, and floating offshore wind at a mere 1%.

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Even though some frowned upon more oil and gas projects, demanding a swift end to fossil fuels and a rapid shift to renewables, others warned about the growing divide in the energy transition journey while lobbying for a more diverse energy mix, which would entail oil and gas alongside renewable energy and other low-carbon sources, such as carbon capture utilization and storage (CCUS), to meet the rising demand and ensure the security and sustainability of the future energy supply.

Aramco’s CEO is one of those who are convinced that the world needs all the energy solutions it can get its hands on to meet growing energy demand and avert a more serious energy crisis while sidestepping a North-South transition divide. While highlighting the need for “the continued deployment of new energy while recognizing the continued need for conventional energy,” Amin H. Nasser, Aramco President & CEO, called on others to reunite around “a more robust transition, with winds of realism in our sails, reflecting the multi-source, multi-speed, and multi-dimensional approach.”

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Many countries around the globe made moves on the energy transition chessboard in 2023. The U.S. set the wheels into motion to tackle climate change by scaling up its renewable energy, but multiple organizations, companies, and government officials reacted to the shift in energy policy by claiming that renewables would not be enough to power the future. These people believe that oil and gas will continue to have their place in the energy mix for decades to come, with natural gas being poised to take the lead during the transition to a low-carbon energy era.

Hurtling toward low-carbon era with gas and renewables

Offshore Energy’s interviews with the CEOs of MCF Energy and Upwing Energy put the role of natural gas at the core of the energy transition as a bridge fuel to a carbon-free world and delve into the way digitalization can lend a helping hand to operators in their endeavors to slash their carbon footprint while the world continues to burn fossil fuels. Despite the hurdles in green energy’s path, during one of Offshore Energy’s previous interviews, we concluded that the U.S. offshore wind sector was poised for growth.

The double whammy of climate change and energy security was the talk of the G20 meeting in India. While the race to make global energy systems more sustainable was underway, it was determined that more investment in energy efficiency was also needed to tackle these two issues. At the time, the International Energy Agency urged countries to double global progress on energy efficiency and triple renewable power capacity by 2030 to keep the Paris Agreement goals within reach and curtail the demand for fossil fuels.

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The emerging low-carbon world order, which is increasingly turning to green energy, is pushing the oil and gas industry to make good on its pledges to tackle climate change by ensuring a major reduction in greenhouse gas emissions from its operations by the end of the decade. Despite where they stand on the fossil fuels dilemma, most of the global organizations and energy players placed their hopes on COP28 to bring the impetus needed to move forward with greater vigor towards low-carbon and net-zero aspirations in line with the Paris Agreement.

On the sidelines of COP28, 60 maritime organizations and government partners agreed on a course to deliver the IMO’s net-zero strategy at ‘Shaping the Future of Shipping,’ an event hosted by the International Chamber of Shipping and the government of the UAE in Dubai. During this event, over 300 leaders – covering over 30 nationalities from across the world, from the entire energy-maritime value chain – convened to work together to deliver a robust regulatory outcome at the International Maritime Organization (IMO) negotiations in March 2024 at MEPC81.

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One of the partnerships and actions COP28 brought to life encompasses the establishment of the Zero Emission Port Alliance (ZEPA) by Maersk’s APM Terminals and the UAE-based port developer and operator DP World. The industry-wide strategic coalition aims to accelerate the journey to zero emissions for container handling equipment (CHE) at ports. Additionally, the CEOs of heavyweight, global shipping lines issued a joint declaration at COP28 calling for an end date for fossil-only powered newbuilds and urging the IMO to create the regulatory conditions to accelerate the transition to green fuels.

The climate talks in Dubai also witnessed the launch of a global decarbonization charter, which was inked by 50 oil and gas companies in a bid to scale up climate action, while green hydrogen producers vowed to produce 11 million tons of the low-emissions fuel for use by the shipping sector by 2030 as part of a joint commitment that aims to enable the use of renewable hydrogen-derived shipping fuel this decade to meet maritime industry’s decarbonization targets.

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While COP28 has answered the prayers of some by becoming the first-ever COP to mention transitioning away from all fossil fuels, the outcome is still perceived as a mixed bag of actions and steps. Aside from tripling renewable energy capacity and doubling the rate of energy efficiency improvements by 2030, the final text of this climate conference brings into play the importance of tackling methane emissions and other non-CO2 emissions in this decade along with the need to do much more to meet the goals of the Paris Agreement.

The COP28 outcome comes against the backdrop of rising geopolitical challenges, global inflation, and energy security woes. Closer scrutiny of the outcome has sparked concerns that the text keeps the doors wide open for more natural gas and LNG. Will the fossil fuel industry take full advantage of this opportunity? The LNG boom has been on the horizon before COP28 but will the stronger green agenda result in even more litigation against such projects in the future? Time will tell, but it does seem likely.

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As the world continues to don its energy diversification armor to fuel its energy arsenal and oil the wheels of the transition to net zero, will the renewable energy pivot mark 2024, or will fossil fuels with LNG as the linchpin remain on the energy throne? 

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