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For as much hardship as the global pandemic has caused, it has
also been referred to as a "great accelerator"; trends that may
have taken 5-10 years to play out fully from the vantage point of
2019 and are now either completed or well underway.
As we discuss in our latest
CCUS Industry Trends report (available on Connect to clients of
our Upstream Transformation Service), such is the case for the
energy transition. It does seem as if last year served as the
"pivot point" about which operators took tangible steps not only to
decarbonize their legacy energy portfolios, but also to begin
investigation of new sources of greener energy.
These trends happened at the macro-level as well, with more and
more regions pledging to reach net-zero emissions by the middle of
the century; notably, China joined this growing group of nations.
While China had not until recently explicitly committed to any
carbon reduction targets, in late 2020, Chinese President Xi
Jinping announced that China will target peak carbon emissions by
2030 and aim to achieve carbon neutrality by 2060. China is such a
substantial emitter that early assessments indicate that if the
region did indeed meet its 2060 goal, global warming projections
would lower about 0.2-0.3° C. It is expected that China will reach
this goal by funding wind, solar, electric vehicle, and battery
storage technology, while de-emphasizing coal (the region currently
makes up about half of global coal demand).
Announcements such as these herald hope that the energy
transition will take place smoothly, while also underlining just
how difficult this will be. To the extent that China is a large
consumer of hydrocarbons, it will have to re-organize its energy
supply chain, and of course affected, existing suppliers will have
to make their own adjustments. Furthermore, there are currently no
mechanisms in place to hold both countries and companies to account
on their net-zero pledges.
Going back to the company-level, upstream service companies are
already having to make such adjustments as their operator clients
cross the bridge to net-zero emissions. While one could argue that
some are making moves outside of their traditional core
competencies, an easy counter-argument is that no one knows the
source rock better than these service companies. After all, who
better to help put back emitted carbon than those who helped
produce it in the first place?
For more information on the CCUS Industry Trends report and IHS
Markit's Energy Transition research please contact James Blanchard or
join our Upstream Transformation in 10 charts webinar
series from the 6th to the 7th of May, the first of a
summer webinar series from our new Upstream Transformation
Service.
