The key objective of an oil and gas transition to renewables is to reduce greenhouse gas emissions and associated carbon footprints. As oil and gas companies are focusing more on improving energy efficiency, renewable energy sources, such as solar, wind, geothermal, and biomass, are increasingly gaining consideration alongside conventional fossil fuels.
Let’s look at some frequently asked questions about energy transition projects and how experienced Engineering, Procurement, and Construction (EPC) solutions can help these projects be executed successfully.
What Types of Energy Transition Projects Are Oil and Gas Companies Investing In?
Clean energy technologies are at the core of energy transition projects. For oil and gas energy transition projects, companies are commonly investing in renewables and/or are switching to low-carbon feedstocks that support the decarbonization of the energy system to achieve market targets.
The following are a few options for renewable energy or low-carbon sources that oil and gas companies may be exploring:
- Hydrogen: As a fuel source, hydrogen has several applications, including power, heating, and transport. Hydrogen has the potential to play a key role in the decarbonization of the energy sector. As oil companies already have expertise in transporting and selling gas, they have an added advantage in establishing themselves in hydrogen production.
- Liquid biofuels: As low-carbon sources of combustible fuel, biofuels are seen as a possible replacement for electricity in applications such as heavier modes of transport, including airplanes and heavy trucks. As governments slowly phase out internal combustion engine vehicles, liquid biofuels are expected to emerge as a strategic alternative and are already blended into petrol and diesel. Several oil and gas companies have invested in biofuel energy generation through biodiesel plants.
- Electrification: Electricity generation from solar photovoltaic (PV) cells or onshore/ offshore wind farms has been a staple option for oil companies aiming to enter the power sector and generate and supply renewable electricity. Investing in electric vehicle (EV) charge points has also been a common strategy for oil and gas companies to transition to renewable energy and related technologies.
- Carbon capture and storage (CCS): Rather than exploring new options for energy transition, oil and gas companies may find it easier and more economical to reduce emissions in their existing operations, thereby reducing carbon footprints. For example, oil companies use carbon capture and storage for enhanced oil recovery and converting natural gas into hydrogen, better known as blue hydrogen. The released carbon dioxide has the potential to be then captured and utilized as a fuel for other things such as home heating.
Unique Challenges of an Oil and Gas Transition to Renewables
When moving forward with energy transition projects, a major concern for oil and gas companies is how to navigate the challenges in shifting from energy-intensive operations to the renewable energy business.
The main challenges faced in oil and gas energy transition projects include the following:
- Determining the economic feasibility of renewable energy business: According to a report by the International Energy Agency, investments in low-carbon businesses account for less than 1% of the capital expenditure of oil and gas companies. The reluctance to transition to renewable energy or low-carbon businesses can be attributed to the difficulties oil and gas companies face in finding the right balance between short-term returns and the long-term license to operate. Switching from the billion-dollar fossil fuel business to the tighter margins of renewable energy projects is a key factor that delays oil companies' transition to clean energy.
- Challenges of retrofitting current infrastructure: Upgrading existing infrastructure from the offshore oil and gas and shipping industries to accommodate the transition to offshore renewable energy technologies is cost-intensive. As a result, oil and gas companies prefer options that minimize the challenges of retrofitting current infrastructure. For example, renewables such as biofuel can be blended with petrol and transported through existing fuel pipelines and infrastructure.
How Can EPC Solutions Help Navigate Energy Transition Projects for Oil and Gas Companies?
While transitioning to renewables and low-carbon technologies, oil and gas companies require the expertise of an EPC partner that can help navigate energy transition projects from conceptualization to completion.
EPC contractors can help with successful oil and gas transition to renewables in the following ways:
- Scope development: A well-defined and early scope development is instrumental in determining the requirements of an energy transition project as well as the estimated budget, timeline and project deliverables. Without a robust scope, an energy transition project can run into rework resulting from frequent changes to the project scope, leading to cost and schedule overruns.
- Front-end planning: In high-investment energy transition projects, front-end planning is critical to ensuring accurate cost estimates for all project stages. Detailed front-end planning provided by an EPC contractor helps key stakeholders determine ROI—a key element that helps oil and gas companies decide on investments in renewables.
- Detail engineering and design: Involving an EPC contractor early in the detail engineering and design process helps standardize the design elements, configure designs, evaluate the constructability of the energy transition project based on the existing infrastructure, and consider account personnel and equipment accessibility. Evaluating constructability during the detail engineering and design phase helps assess the procurement and fabrication needs of the project.
- Material procurement: Material procurement for energy transition projects requires advanced planning to ensure that project materials are readily available to avoid schedule creep. For upgrading infrastructure for renewables, items such as long-lead equipment, critical rotating pieces of equipment, and heavy-lift plans need to be considered and communicated accordingly with vendors, engineers, and the construction crew.
- In-house fabrication: The challenging designs of clean energy projects require innovative solutions to address piping and pressure vessel fabrication, modules, and assembly. In-house fabrication by an EPC contractor offers flexibility to accommodate design changes while providing customization to meet exact specifications as demanded by the project.
- Safety of construction crew: The safety of the construction crew is a priority in large-scale energy transition projects for oil and gas companies. An EPC contractor with extensive safety programs and protocols in place can help identify any work in construction that may be seen as extra dangerous or hazardous and help develop and implement safety plans effectively.
Partner With H+M Industrial EPC—Oil and Gas Transition to Renewables
H+M Industrial EPC has provided best-in-class EPC solutions to the energy and chemical industries for over thirty-five years. Our in-house engineering and construction teams have the experience and expertise to implement a construction-driven approach with strong project controls to minimize risks of frequent changes and rework during the project life cycle.
With in-house fabrication services and industry-leading procurement management solutions, we can help successfully achieve any transitions to alternative renewable energy for the oil and gas companies that we serve.
