Written by: Michael Gonzalez, Senior Director of External Affairs, Laredo College
The energy industry, and particularly those in the petroleum fuels industry, are faced with the challenge of meeting increasing market energy demand and growing operational energy needs while decreasing emissions and environmental impact. Amongst many possible solutions, the prevailing one is a merging of two seemingly competitive industries.
Natural gas is the fossil fuel of the near future with its availability, comparatively low recovery cost, and comparative cleanliness amongst other fossil fuels. On the other hand, renewable sources of energy continue to make significant headway in lowering costs, improving critical battery storage technologies, and increasing reliability and efficiency.
In many instances, the narrative regarding the energy industry is that fossil fuels will continue to be the primary source of power generation until renewable energy sources entirely replace them. While there is some validity to that argument, the time horizon seems to be quite long. Instead, data suggests that the transition will be quite a bit more gradual, with renewable technologies having significant economic opportunities in the short run within the petroleum industry.
The primary applications for the implementation of renewable energy and technologies within the current petroleum-based power generation industry are primarily found in upstream production, particularly where solar-powered heating can be applied in enhanced oil recovery, offshore wind energy can power offshore recovery operations, and well pads can be powered by solar or wind energy, especially in remote locations. Additionally, there are opportunities for the cogeneration of geothermal energy in some instances. Furthermore, this partnership is not new – solar power was used in the recovery of petroleum fuels beginning in the 1970s when solar PV panels electrified warning lights for offshore oil installations.
Amongst the identified factors which are rebalancing the equation toward more integration of renewable energy into oil and gas operations are increasing energy intensity in the petroleum industry and dramatic decreases in cost for many renewable energy technologies. A recent examination of cost data for renewables found that the average cost of electricity from solar was seven times higher in 2009 than in 2017. If this trend of continually decreasing generation costs from renewable sources continues as expected, we will likely see even more solar energy generation and other renewable energy generation projects in our region in the future. Contrastingly, the early days of the petroleum industry where reservoirs of recoverable supply were readily available, with shallow drilling and high pressurization, have largely been depleted. Today, remaining fossil fuel reserves, while ample to power our energy needs for generations, are defined by deeper reservoirs, lower pressure and the need to employ enhanced oil recovery techniques, all of which also require additional energy to implement. A 2017 study found that the net energy ratio, defined as the ratio of energy produced to the energy used to produce it, declined by 46% to 88% over the past 40 years. This net energy ratio change is attributed to the combination of declining field production and increased energy needs associated with enhanced oil recovery methods.
The cost of renewable energy production has historically been the primary factor in determining whether renewables would have a place in the energy generation landscape. As technology improves and the cost of energy generation from renewables decreases, more opportunities arise for integrating renewables and fossil fuels. The partnership between the energy generation of today, which will primarily come from natural gas and other fossil fuels, with the energy generation of tomorrow, which will mainly come from renewable energy sources, is nothing if not intuitive, responsible and good business. If these two industries do what is best for their bottom lines, both will benefit economically. More importantly, power generation overall, but particularly in the petroleum industry, will get a lot greener – both in terms of profitability and reduced impact on the environment.
Michael Gonzalez provides commentary on local business. He can be contacted at email@example.com.