Earlier this week, world leaders convened in Glasgow, Scotland for the 2021 United Nations Climate Change Conference to discuss how they’ll tackle the growing problem of climate change and encourage sustainability practices. Over the past decade, as the threat of climate change has grown, we’ve seen greater regulations placed on organizations—especially oil and gas companies—to curb the adverse effects fossil fuels have on the climate.
Considering these changes, oil and gas companies have started diversifying their operations, placing more emphasis on sustainable sources of energy, including electric vehicles and solar and wind power. ASUG recently sat down with Benjamin Beberness, global vice president of the oil, gas, and energy business unit at SAP. In this first part of our conversation, he discussed the industry’s rapid shifts in priorities, as well as the key challenges these organizations are facing.
ASUG: What are the main hurdles that oil and gas organizations are facing right now?
Benjamin: The main overarching one is the sustainable energy transition. Oil and gas companies are transitioning to be energy companies. They’re diversifying their portfolios to be more inclusive of green energy, retail, and even utility businesses. They are changing their refineries to produce biofuels and produce hydrogen. Fundamentally, oil and gas companies are just going through a change. We have a lot of regulatory requirements coming out, especially in the European Union. We have the Paris Agreement. All of that has just put a fairly strong amount of pressure on these companies to figure out how to fundamentally reduce their carbon footprint.
But as the world changes to new energy—such as renewables like solar and hydrogen energy—then it all has to come together. That brings complexity to the world and to the business problems that these organizations have to solve today. That’s where most of them are today: trying to figure out how to facilitate these changes in a safe, efficient, and economical way that allows them to continue to produce the products that are needed by us consumers.
There’s a need to reduce emissions, so there’s this perception that we need to just get rid of oil and gas companies. But people need energy. One of my hopes is that as our energy demand goes up—especially in parts of the world today that don’t have a safe and reliable energy source day in and day out like we’re fortunate to have in the United States—these countries will skip the need for coal and natural gas and oil to provide that safe, reliable energy, and jump straight to renewables. I think that’s what most of the forecasts are showing. That opens up this great market for renewables across the board. Solar and wind are projected to represent about 69% of energy generation in 2050. That creates this great market for oil and gas companies to break into as oil and gas consumption decreases.
There’s still a need for those biproducts of the oil that allow us to have things like plastics and medicines that we use regularly. There is still this demand that we have as consumers.
I was on a call earlier today and someone commented that “this is an everyone problem.” Everyone has to be contributing to this process. That includes people making the right energy consumption choices, buying the products, and sustainably running our businesses. Everyone has to be contributing or there is no way we’re going to be able to ever hit the goals set by the Paris Agreement.
ASUG: With that in mind, what are some areas of growth that you are seeing in this industry?
Benjamin: As I said, renewables are definitely a growth opportunity. Retail is another growth opportunity. We are seeing a lot of oil and gas companies expanding their retail operations and then redefining those retail operations, as they start to support electric vehicles, as an example.
Another growth opportunity is around carbon capture. Due to the very nature of carbon capture, oil and gas companies are excellent companies to run carbon capture facilities. In fact, you see a lot of companies starting to build out their carbon capture operations. Oil and gas companies are set up because they’re so used to running large assets like that. They also have the facilities to get rid of the carbon, and either reuse it through other products like cement or by putting it back into the ground, into the large production areas that they had before, such as unproductive oil fields.
ASUG: What have been the short-term and long-term effects that COVID-19 has had on the oil and gas industry?
Benjamin: In the short term, we all saw the demand for oil drop. I think that was pretty obvious to everyone. People weren’t flying; people weren’t driving to work every day. There was less energy demand. Another short-term effect is that these organizations learned how to do business differently. These companies learned how to run and operate their systems with a remote workforce. They have started to automate more and more. They’ve started to look at how to digitize their operations.
Long term, it gets back to what I was talking about. Because of COVID-19, the drop in demand, and the issues with supply caused by OPEC, a lot of companies are thinking about what they want to be. I was talking to a company about a month ago, and it’s trying to decide if it wants to be a chemical or renewable company. A lot of companies like BP and Shell have restructured themselves in an attempt to reinvent themselves. I think COVID-19 accelerated that process. The long-term impact is that these companies are trying not to be like Kodak. They’re trying to be around for another 100 years.
Want more insights on how SAP is helping its oil and gas customers? You can watch the ASUG Best Practices: SAP for Oil, Gas, and Energy session on demand. Register here to watch.