‘Diversity of supply’ steadily entered the energy industry lexicon as the energy transition grew and found its feet, reflecting the need to balance fossil fuel pollutants with cleaner renewable generation capacity. Prior to this point, states relied on their resource-based competitive advantage, whether it be the world’s petro-states or ample hydroelectric supply. As the need for renewables grew, the often-hostile environments that preference wind and solar power suddenly found exceptional utility.

Net-zero roadmaps laid out the decarbonisation benefits of a diverse energy supply, yet the alternative benefit lies in the opportunity to democratise energy supply away from petro-states. As the Russian invasion of Ukraine has brought into the spotlight – an overreliance of energy supply from one actor provides a disproportionate ability to exert power over consumers.

The Power Play

In fairness, many had warned of an overreliance of Russian oil and gas for many years – but clouded by the influx of Russian money into the West, the emerging belief was that the Russian state had turned a corner and could be relied upon. This belief barely wavered when Russia illegally annexed Crimea or poisoned opponents on British soil with chemical weapons – finally, the invasion of Ukraine was too far. Yet, not quite for Russian energy for the time being.

These actions are nearly incomprehensible within a Western progressive paradigm, and were widely accepted, as sudden decline in oil and gas supply was too fraught a question for politicians to face up to.

OPEC+ presents additional concerns towards a small cartel of states that hold international markets to their terms, holding off on supply increases to enjoy preferential profit margins. For many of these, their cost per barrel can be up to $30/barrel lower than market-orientated operators.

Now with natural gas surging as the alternate avenue to heavy oils and coal, new players from Africa, Latin America and Africa have entered the market – providing necessary options to seek new supply routes as the energy transition progresses.

The Technical Triumphs

The geopolitics of energy has never been an honest game, and there is no reason to believe there will be significant developments on that front. Fortunately, the competitive marketplace encourages the development of new technologies that will create advantages over competitors – and on this front, the need to develop lower carbon generation or decarbonisation technologies has created a new ‘space race’.

This time, however, it is between the oil majors and the oil states – who can find the route to low carbon solutions to maintain their growth within the context of net-zero ambitions.

Transmission & distribution

One of the most notable barriers to a diversified energy mix that can be inclusive of renewable generation capacity, are the ageing and inefficient transmission and distribution grids – developed to sustain power capacity from utility-scale generation facilities. With the rapid addition of variable generation loads from a host of new generation sources, the cost of connection and the inertia of electricity transmission become increasingly inhibiting factors.

The problem herein is that a renewable-based generation requires updated, intelligent transformers and distribution networks supported by a range of battery storage infrastructure. These ageing infrastructures can and do work hand-in-hand with modern additions, they cannot be entirely redesigned and integrated – therefore, it is crucial to engage with technologies that can merge the old with the new.

Read our recent interview on how one deep-tech innovator is engaging with this exact problem over at the Climate Council

Pipelines

Pipelines are easily the most efficient and cost-effective method for transporting oil and gas from the point of production to refiners or terminals for transport elsewhere – albeit with a degree of unavoidable environmental impacts in their construction.  

Renewable natural gas (RNG), ‘the gaseous product of the decomposition of organic matter’ and also known as bio-methane, is the go-to replacement for natural gas pipelines. Once refined and purified, RNG is suitable to be transported through traditional pipelines

Hydrogen on the other hand, often requires specialised pipelines due to the potential for leakage, as the hydrogen molecule is far smaller than gas and can even pass through steel. That being said, the preferred option is to blend natural gas with up to 15% of hydrogen (and preferably green hydrogen), to offset the carbon burden.

Terminals

Storage terminals are a crucial element to the security of energy supply, as European states are witnessing with the sudden drop in supply from Russia and the US has seen with their lowest levels of the Special Petroleum Reserve since 1985. The consequences of these are heightened prices for oil and gas, and as supply becomes increasingly scarce, the possibility of blackouts in Europe could become a reality. When the world’s wealthiest region cannot sustain their energy demands as they rely on a handful of major supply routes, it pulls into acute focus the need for greater diversity of energy sources.

While repurposing these storage terminals is not prudent in the short-term when they are needed most, they are ample examples of strategies that are looking to reform them to store both bio-methane and be used as green hydrogen hubs.

In this first example, ExxonMobil is repurposing an ageing oil terminal to act as a bunkering unit for hydrogen produced via the adjacent offshore wind farms, and to store ammonia – crucial for transporting hydrogen.

Similarly, the reutilisation from LNG storage into bio-methane storage can be a relatively easy and inexpensive shift – as is being demonstrated by Fluxys LNG. Their new operation will provide consumers with ‘fully decarbonised’ bio-LNG service. No doubt one of many players to soon enter this arena.

Rigs

When talking about existing oil and gas infrastructures, the picture that appears in most minds are the towering behemoths of the seas – oil rigs. While these are obviously specially designed for one major purpose, oil majors and EPCs are beginning to reimagine how they can be used to assist in the development of offshore wind farms and as vehicles to place carbon into empty oil and gas assets.

Rigs could play host to a range of alternative forms; acting as ecological hubs for marine wildlife restoration, eco-tourism centres, substations for offshore wind transmission, or even offshore housing units that could house over 1,000 people.

With the decommissioning costs, some of the most burdensome for the sector, with offshore basins requiring tens of billions of dollars to undertake the operations – the reimagining of rigs need not be a sunk cost that inhibits the energy transition. Rather, with a little ingenuity, they can become lasting structures that facilitate industry, either within energy through CCUS or offshore wind, or in restoring damaged marine ecosystems.