In the last year, energy security has overtaken sustainability.
That’s what Tom Ellacott, senior vice president of corporate research at Wood Mackenzie, said in a statement sent to Rigzone, adding that “companies have also benefited from recent commodity prices and margins to deliver a record cash flow.”
“This is not to say that decarbonisation targets cannot be achieved and that priorities cannot change, but to stimulate activity there needs to be a recalibration of the current risks and benefits for investment in low carbon technologies, as well as new incentives from both government stakeholders and financial institutions,” Ellacott said in the statement.
“There is no one answer, but smart oil and gas and natural resources companies will realize that protecting the status quo would be a mistake and begin to manage their portfolios to reflect a balanced approach to legacy production management and carbon management,” he added.
In the statement, Wood Mackenzie noted that, according to a new business report, “companies can address this complex dynamic in three key ways.”
“Feeding legacy cash cows while shifting to a growth transition mindset, incorporating transition risk and reward at differentiated investment hurdle rates and using new business models to enable growth and close valuation discounts,” the company added.
Meeting of G7 climate ministers
In a statement after a meeting in Sapporo, Japan, last weekend, G7 climate, energy and environment ministers highlighted “the real and urgent need and opportunity to increase energy security and accelerate clean energy transitions while diversifying supply, sources and routes” to “address the current energy crisis and achieve our common goal of net zero emissions by 2050”.
“We emphasize that an accelerated transition from clean energy to net zero is key to improving the security, stability and affordability of global energy supplies,” the ministers said in the statement.
“We emphasize our commitment, in the context of a global effort, to accelerate the phase-out of fossil fuels without rebates to reach net zero in energy systems by 2050 at the latest, in line with the trajectories needed to limit global average temperatures to 1.5°C above pre-industrial levels, and we call on others to join us in taking the same action,” the ministers added.
In the statement, the ministers also stressed the need to support a just transition of the workforce at the national level “and create decent work and quality jobs for all”.
“To this end, we will further promote our ongoing efforts to support and prepare workers and communities, including through inclusive social dialogue, skills development and transfer, social protection, education, retraining and training, at local, regional and national level, in line with the 2015 Guidelines for a just transition of the International Labor Organization”, stated the ministers.
Energy security like oxygen
In a report sent to Rigzone in March last year, BofA Global Research argued that energy security is like oxygen to the economyand adds that businesses and consumers tend not to notice until they start to lose it.
“But once supplies run out, economic activity grinds to a halt and little else matters,” BofA Global Research said in the report.
“With low OPEC+ spare capacity, low inventories and the conflict between Russia and Ukraine, energy security has become a key focus for markets,” BofA Global Research added in this report.
To contact the author, please send an email andreas.exarcheas@rigzone.com
