Balancing Act: The Global Energy Sector's Dual Quest for Sustainability and Security

The energy industry is currently navigating a pivotal dual challenge: ensuring the delivery of reliable, affordable, and secure energy while aggressively reducing global greenhouse gas emissions to mitigate climate change. Achieving reliability and security in energy is indispensable for successfully addressing climate concerns. The stakes are high, as failure to achieve either objective could lead to significant consequences, compounded by the projection that global energy demand may double by 2050, mirroring the rapid growth of the global population1.

Ensuring Energy Security

As economies grow and populations expand, energy demand escalates. Historically, the oil and gas industry has played a pivotal role in meeting this demand, supporting economic stability and industrial operations. However, modern advancements, particularly in artificial intelligence (AI), are set to further intensify energy consumption. By 2028, AI's energy usage is expected to surpass that of entire nations like Iceland 2.

Recent geopolitical tensions highlight the imperative of reducing dependency on specific energy sources, such as Russian gas in Europe, emphasizing the need for enhanced energy efficiency and conservation. Moreover, the digitalization of energy infrastructure introduces new vulnerabilities to cyber threats, necessitating robust security measures.

Pursuing Decarbonization

The imperative to address climate change requires a substantial decrease in carbon emissions, with energy consumption and production alone responsible for over two-thirds of annual greenhouse gas emissions1. In 2022, the production, transport, and processing of oil and gas contributed 5.1 billion tonnes (Gt) CO2-eq, representing nearly 15% of total energy-related greenhouse gas emissions3. As major contributors to these emissions, the oil and gas industries face mounting pressure from governments, investors, and the public to transition towards lower-carbon and ultimately carbon-neutral operations. This transition is critical not only for achieving global climate targets but also for ensuring the long-term sustainability of the energy sector. However, achieving this transition in the oil and gas sector is exceptionally challenging due to its fundamental role in global energy supply chains and the complexities involved in decarbonizing its operations.

Capital Requirements and Investment Shifts

Addressing these challenges requires substantial financial input, around $50 trillion will be needed by 2050 to tackle the global energy trilemma effectively. 4 In 2024, global energy investments are expected to exceed USD 3 trillion for the first time, with USD 2 trillion earmarked for clean energy technologies and infrastructure. Since 2020, investments in renewable power, grids, and storage have surpassed those in traditional energy sources like oil, gas, and coal. Despite this, investment in the global upstream oil and gas sector is poised to grow by 7% in 2024, reaching USD 570 billion. 5

Collaborative Solutions

Achieving these dual objectives requires collaborative efforts across industries, involving incumbent energy companies, startups, research institutions, capital providers, policymakers, and consumers. Key sectors such as LNG, hydrogen, and carbon capture are pivotal in advancing climate solutions, leveraging the expertise and resources of the oil and gas industry.

Navigating the dual challenge of delivering reliable, affordable energy while reducing greenhouse gas emissions is critical for the energy industry. This journey demands collaborative efforts from all stakeholders—governments, businesses, and consumers—to adopt sustainable practices and invest in clean technologies. Particularly within the oil and gas sector, transitioning to lower-carbon operations is challenging but essential for long-term sustainability. By fostering innovation and maintaining a commitment to environmental goals, the industry can ensure a resilient and sustainable energy future.

References

1. 1. Deloitte (2023) The Energy Trilemma: Finding the Right Balance Between Sustainability, Security, and Affordability. Available at: https://www.forbes.com/sites/deloitte/2023/04/11/the-energy-trilemma-finding-the-right-balance-between-sustainability-security-and-affordability/ (Accessed: 9 July 2024).
   2. World Economic Forum (2024) How to Manage AI's Energy Demand Today, Tomorrow, and in the Future. Available at: https://www.weforum.org/agenda/2024/04/how-to-manage-ais-energy-demand-today-tomorrow-and-in-the-future/ (Accessed: 9 July 2024).
   3. International Energy Agency (IEA) (no date) Emissions from Oil and Gas Operations in Net Zero Transitions. Available at: https://www.iea.org/reports/emissions-from-oil-and-gas-operations-in-net-zero-transitions (Accessed: 9 July 2024).
   4. Deloitte (2023) Financing the Green Energy Transition Report. Available at: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/deloitte-financing-the-green-energy-transition-report-2023.pdf (Accessed: 9 July 2024).
   5. International Energy Agency (IEA) (2024) World Energy Investment 2024. Available at: https://www.iea.org/reports/world-energy-investment-2024 (Accessed: 9 July 2024).
      

For a deeper exploration of the dual challenge of sustainable and secure energy supply, along with insights into capital and investment dynamics and emerging opportunities in the energy industry amid the energy transition, download the Key Takeaways Report from the New York Energy Capital Assembly.

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