Why are oil companies entering the sustainable energy market?

  • 03/11/2020
  • 9 minutes

Many people consider research in sustainable energy as an opponent in the Oil & Gas (O&G) market. As if one could eliminate the other. But why, then, are so many companies that extract, refine and distribute oil investing in this new energy paradigm?

In this article, we invite speaker and author Marcelo Gauto to demystify the subject. The industrial chemist specialized in Oil, Gas and Energy helps us to understand everything about this historical movement in the sector. Check out!

Oil companies that are producing sustainable energy

When it comes to sustainable energy, O&G companies have long been investing in research and development – more than most people would imagine. According to Marcelo, since the Kyoto Protocol, even in 1997, the market is encouraged to make the gradual transition to cleaner energy matrices.

And here we have an important point to discuss. This movement is not as sudden as imagined, in which oil is completely abandoned overnight. The initial focus of this transition is on energy efficiency, reducing consumption and reducing and recycling waste generated by the production chain.

It is a balance between development, associated costs and opportunities for this change to be beneficial to society and marketable to companies. And many organizations around the world are betting on that. Marcelo points out some of these initiatives.

He says: “Total, Shell, BP and Equinor are the most prominent companies in the Oil and Gas sector that today allocate annual investments of around one billion dollars in alternative energy sources.” He also gives some details on how each has addressed the need for market disruption.

The industrial chemist says: “BP and Shell have investments in biofuels in Brazil, wind farms in the United States, solar energy assets and tens of thousands of electric vehicle charging points spread across Europe, among other investments.”

He goes on to say about the French company Total and its installed capacity in solar energy, in addition to the Norwegian company Statoil, which changed its name to Equinor. This is the central point for companies in the sector at the moment: the focus on oil becomes a focus on energy as a whole. A mindset reorganization that is happening at the same time inside the offices and outside in society.

The benefits for the company

In addition to social concern, O&G businesses also seek market and competitive advantages when looking for new ways to produce energy. See what these benefits are.

Technological vanguard

In very competitive sectors, mastering cutting-edge technology is essential to offer better, cheaper and more efficient products.

The transition to sustainable energy models is inevitable in the future. Whoever invests today, will arrive much more prepared for when this is a need for survival in the market.

Business diversification

As we noted, the transition from energy matrices will not be by substitution – at least at first. It will be an addition to the already established models. That is, whoever invests gains diversification to gain more market. In an industry with prices and conditions that fluctuate a lot, it is interesting to have other fronts on which to compete.

Positive marketing

It is not possible to disassociate the search for sustainable energy and how it impacts the company’s image to the public. In addition to social responsibility, this research is a great marketing force for companies that are exploring a new future.

The benefits for society

The advantage of this movement for humanity as a whole is evident: sustainable energy means less socio-environmental accidents, less pollution and its indirect implications. After all, this concern can impact public health, spending on pollutant treatment and containment measures.

In the future ahead, we can still think of easier and more abundant use of less polluting renewable matrices, with multiple agents, decentralized, with companies of all sizes and, thus, exponentially increasing and democratizing our productive capacity.

The current market situation

Recently, the market itself has been obliging O&G (Oil & Gas) companies to take their steps towards this transition of energy matrices. The price of oil, with ups and downs for some time, weighs when deciding on new investments.

Brazil is a good example for analyzing how this transition is already in motion without limiting the sector. Marcelo tells us: “The volume of anhydrous and hydrated ethanol is now higher than that of type A gasoline produced in the country’s oil refineries. By 2030, ethanol production is expected to increase by at least a third of what we have today. The use of renewable energy sources grows every year at rates higher than those of fossils. In the last decade, the consumption of wind energy has grown just over 20% a.a. and solar almost 50% a.a. In the same period, oil consumption grew 1.2% per year. ”

The prospects for the coming years

The Covid-19 pandemic affected the entire market in all its sectors, which also makes it difficult to gauge its impact in the short term for O&G. As the expert tells, now is the time to survive the storm, only then to point the sails to the best route.

Regardless, there is a future that we can see as inevitable. Marcelo points out what should happen in the market in the long run: “If Oil and Gas prices remain low, investments in both fossils and renewables (biofuels in particular) will be smaller and more selective. It is a challenging scenario for all energy companies.

The development of new technologies gains even more importance so that we have something disruptive in the market, capable of boosting clean energy. The reduction in costs in the production of North American Shale and Brazilian pre-salt are proof of how the technology is capable of changing a scenario. There is no reason to believe that this cannot happen with other sources of energy.”

The conclusion for this discussion could not be otherwise: companies throughout the O&G production chain have a social responsibility and a competitive need to invest in technology and disruption in the market. The idea is not to replace oil for good, but to use sustainable energy to expand the market and its possibilities. Whoever is investing in it today is the one who will stand out in that future.

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