Few service companies in the energy sector have as comprehensive a view on what is happening in the energy transition being pushed by governments around the world than Wood, PLC. Still sometimes referred to as an oil and gas service company in the media, Wood in fact employs more than 35,000 professionals in 60 countries offering engineering expertise in almost every facet of the energy space.
As leaders in energy-related industries and government officials meeting in Houston at the CERAWeek 2024 conference this week, I caught up with Wood CEO Ken Gilmartin and Dan Carter, the company’s President of Decarbonization, as they prepared to travel to the event. I kicked off the discussion by noting that the fossil fuels that transition proponents want to displace continued to provide roughly 80% of the world’s primary energy, a percentage that has held stubbornly firm for the last quarter century despite the investment of trillions of dollars in alternative energy and transportation sources. What challenges must be overcome to finally cause that percentage to begin to appreciably drop?
Gilmartin began by commenting on the challenges of sourcing the massive new quantities of critical and rare earth minerals needed to facilitate the effort to scale up wind, solar and electric vehicles to truly meaningful levels. “When I was at CERAWeek last year, I got more incoming interest around our metals and minerals business than I almost did on anything else,” he said. “That’s a big, great unspoken contributor to the energy transition effort. That whole sense that copper demand is going to double in the next ten or 10 to 12 years and some of the other energy transition materials required in the US alone is going to increase by something like 20 times in that same period.”
Wood’s view is that the effort to dramatically ramp-up minerals supplies must begin with a determination of where and how to source and generate the energy needed to fuel the mining operations. In most cases, that energy is generated with fossil fuels – natural gas and coal in power generation and gasoline or diesel in transportation. That reality places greater emphasis on Carter’s decarbonization expertise.
“It starts with the optimization piece,” Carter says. “If you can optimize your logistics in terms of the movement of large vehicles, that’s a very good place to start in terms of maximizing that efficiency. And then you look at the integration of renewables or alternative fuels for those vehicle fleets. We’ve been working with a mining client who consumes about 8 billion liters of diesel every year. If you can displace that with an electrified or a hydrogen alternative, that’s a huge reduction in overall emissions that you can just get just from looking at that one challenge.”
No one doubts that solving the production, transportation and logistics aspects of this global transition is a huge piece of the challenge. But Gilmartin says that solving the problem of timing presents a test that could be even harder to resolve, especially given the reality that countries must maintain their energy security as a high priority.
“I’ve said this consistently: There is a journey here. We’re going to get to net-zero, it’s the time scale associated with making that journey that is not clear,” he says. “Some of it is just not clear because you’re still you’re still looking at this whole idea of energy security meeting energy transition. What’s affordable? How is it going to win?”
He points out some potential problems with the approach of governments attempting to subsidize specific favored industries up to scale. “You got to be very careful of creating an industry that is based purely on subsidy,” he warns, “because one thing we’ve known in our past is when you over-subsidize something, you can end up picking the wrong winners from a technology standpoint, and they can’t get to scale.”
Obviously, a plan that picks the wrong winners can prolong the time frame required to reach emissions goals. Again, this is where decarbonization of existing energy solutions can have a major impact. Critics complain that carbon capture and storage (CCS) projects in which Wood has long been an industry leader can effectively prolong the life span of fossil fuels by lowering their emissions, but I asked Gilmartin if that’s really a bad thing in his view.
“From a Wood standpoint, we’re very proud of what we’re doing” in the CCS space, he says. “We’re proud of our efforts in the traditional energy security space, how we’ve worked with our clients to decarbonize or reduce the carbon intensity. And probably every single plan that we’ve worked on, we continue to do that – reduce, reduce, reduce the carbon intensity of what it is that you’re working on. We’re engineers. We love to adapt, adopt, improve, and scale as you go on. And that will always continue.”
Carter adds that it is important to remember the major contributions oil and its associated products make in efforts to manufacture and bring the proposed replacements to scale. “How many folks appreciate that the manufacturing of plastics used in the production of electric vehicles come from oil as a feedstock? Oil and gas are actually enablers of other aspects of the energy transition,” he says. “What we’re doing today is pretty much all of the projects we’re working on today are considering carbon intensity.” For many projects, he adds that the sustainable use of oil and gas as feedstocks are critical.
The Bottom Line
Every year, certain overriding themes emerge out of the CERAWeek conversations. Last year, the topic of energy security emerged and remained dominant throughout the remainder of the year. One result of that was a year in which demand for all three fossil fuels – oil, natural gas, and coal – set new all-time highs as companies and nations worked to secure resources for the future. That rising demand has persisted throughout the first quarter of 2024.
It will be interesting to observe whether this year’s event signals an emergence of sentiment among national and industry leaders to pull back from these concerns over energy security, but that seems unlikely as the event kicks off. One thing is certain: A continuing rise in demand will also create more demand for the decarbonization solutions being developed by the engineers and innovators at companies like Wood.