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How Energy Knect are helping their clients drive new business
How Energy Knect are helping their clients drive new business

With the evolving COVID-19 situation and its growing impact on the global economy, one of the biggest challenges that companies face right now is remaining competitive and protecting their market share position.

Traditional business development models such as live conferencing, networking events and workshops have all been disrupted due to the global pandemic. Moreover, marketing budgets have either been ceased or heavily-reduced as companies focus on liquidity.

According to a recent research survey conducted by McKinsey & Company (Global B2B Decision Maker Pulse Survey), it found that although B2B companies may believe that their focus on liquidity and other short- term concerns are justified, it could be costly. Their research suggests that companies are more likely to thrive if they act aggressively to capture market share during the downturns rather than wait for a recovery to begin. This agility, combined with a focus on customer value and support, often gives companies the first-mover advantage that other players cannot match. First movers during the current crises could emerge stronger in the next normal.

So how do companies remain competitive and sustain their market share position, and how can Energy Knect help with this?

Whilst traditional business development strategies have been disrupted and companies come under increased economic pressures, Energy Knect’s aim is to help their clients generate new business and identify new opportunities to remain competitive and sustain their market position. Energy Knect partner with you to help you save money, time and resources by using a collaboration of their vast industry experience, senior network, advisory committee and strategic partnerships.

We support our clients in the following areas;

  • Facilitation of new business relationships
  • Help you identify industry trends and opportunities by plugging you into our global resources and senior network
  • Client analysis and best practice methodology
  • Because we partner with the industry’s leading conferencing networks, we are able to keep you updated with multiple business development opportunities and options that are unbiased and suited to just about any budget
  • A free online industry networking tool to help you generate new business and find new opportunities remotely- register for free here.

To find out more about how we can support you and your team, please feel free to visit: www.energyknect.com. Alternatively, feel free to ping us an email on info@energyknect.com , and we will gladly get in touch to explore ways of how we can support you and your team.

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Options to serve a greener energy proposition
Options to serve a greener energy proposition

Wesley Johnson, Energy Knect 

Hydrocarbons have powered economic growth for 150 years, but now that the impact of fossil fuels on the planet is widely recognized, the oil and gas sector is under increasing pressure to decarbonize and reduce their environmental impact. Policymakers and society are pressing change, threatening the operator's license to operate. Investors are increasingly conscious of environmental issues and are now pushing companies to disclose consistent, comparable, and reliable data.

To meet growing energy demand, making the most out of the existing energy supply chain through decarbonization seems to be the most cost-effective solution for the mid-term. The specific initiatives a company chooses to reduce its emissions will depend on factors such as its geography, asset mix, and local policies and practices. Companies should embrace this change and try to adapt to a challenging policy and investment landscape, whilst working towards a carbon-neutral economy. 

According to a report from Mckinsey on sustainability, 90% of known technological solutions to decarbonization are within the grasp of operators at a cost no more than $50 dollars/metric ton of carbon.

As the pressure mounts to work towards a net-zero economy, there are multiple options that operators could consider to optimize their operations. Digital technologies could be essential in tracking emissions by site and in the recording process- as BP and EOG, amongst others, have made it clear in their strategies. According to Bloomberg, five of the Oil and Gas Climate initiatives (OGCI) 12 investments have been in emissions monitoring from sensors, satellites, and reporting. 

Below, I have highlighted a few options that could help oil and gas operators navigate towards a net-zero economy.

Optimizing Operations

Maximizing stability and integrity may require upgrades of process, controls, and parts. A less capital-intensive route is to leverage data and advanced analytics to help optimize and stabilize operations. Predictive maintenance and automated condition monitoring can help reduce planned interventions and extend runs, improving stability, and reducing emissions. Advanced analytics enables the next level of energy efficiency, isolating operating parameters that minimize power per unit throughput.

Sustainable Design 

There are multiple design options to make the operation less emission-intensive. However, they have not become a priority as the upfront investment required typically outweighs other considerations, such as energy efficiency or cost- to operate. With total life-cycle value as the target function and the increasing social license to operate, operators may be more motivated to explore sustainable design. Doing so using proven technologies can not only reduce operating costs but also generate additional revenue streams. 

Monetising wasted gas

An estimated 140 bcm of natural gas is wasted globally in flares, vents, and leaks. If monetized this could generate more than $10 billion of revenue globally. For existing operations, the recovered liquids could be integrated into the existing liquids production and processing infrastructure and add potentially significant revenues and profits while measurably and variably reducing emissions of short-lived climate pollutants. 

The IEA has highlighted the following technologies that could play an important role in monetizing stranded gas; Portable CNG or mini-LNG facilities to treat gas onsite, small-scale gas-to-methanol, or gas-to-liquids conversion plants, and onsite direct electrical power generation. The gas that would be otherwise flared could be captured and turned into electrical power that could be used onsite or sold back into an electrical grid. For new projects, it will be a case of regulations and careful project selection and design.

Zero-carbon energy supply

Sustainable sources of energy such as offshore-grid based electrification can help to lower the emission intensity of an asset or generate revenue, and several majors, including BP, are considering ways of powering their platforms from shore using renewables, a feature already achieved in Norway. The newly commissioned Johan Sverdrup is powered from shore even though it is 140km from Stavanger. However, this is depending on the fuel mix supplying the country’s electricity, and the distance of the offshore asset. In the case of Norway, hydro supplies nearly all the country’s electricity, which results in significant savings. Integrating renewables onto the production platform or near the platform might be a cheaper alternative to electrification from shore and benefit countries that don’t derive the majority of their electricity from renewable energy sources. In regions with higher energy costs, governments could encourage the use of energy hubs as common sources of energy as we are seeing in the UK with the UKCS Energy Integration Project. Energy hubs can support energy transition by integrating renewable electricity generation with carbon and hydrogen storage and transportation solutions to enable; more optimal offshore wind power locations, renewables supply intermittency, cost-efficient carbon capture, usage and storage, and potential interconnection with other countries.

Hydrogen

For good reasons, hydrogen is receiving plenty of attention in the upstream sector at the moment. According to the Oxford Institute for Energy Studies, Hydrocarbon feedstock for hydrogen production is the most economical due to its low technology and commercial risks. Hydrogen can be synthesized from fossil fuels and can be extracted with zero carbon emissions. The combustion of Hydrogen releases only water and therefore makes it a very attractive prospect for our journey towards a net-zero future. If Hydrogen produced is from low carbon sources, or the carbon emissions created are captured, it can eliminate the largest sources of carbon dioxide emissions. According to Baringa Partners, Hydrogen can play a key part in decarbonizing the energy sector, but the determining factor is whether it can be produced at scale, in a low carbon manner, and at a sufficiently low cost to be competitive.

CCUS (Carbon capture, usage, and storage)

CCUS technologies have the potential to generate low carbon power, support decarbonization, and enable the production of low carbon hydrogen at scale. Overmore it has advantages such as job creation and economic benefits. In this market, the oil industry is well placed to lead, because it already uses carbon capture for use in Enhanced Oil Recovery (EOR). CCUS has become an increasingly popular decarbonization option as seen amongst the majors. BP, ENI, Equinor, Shell and Total have all signed up to spearhead CCS developments such as the Northern Lights Project in the Norwegian Continental Shelf and the Net-Zero Teeside Project which aims to develop the UK’s first decarbonized industrial cluster through the use of CCUS. 

CCUS technologies are seen as a key element working toward a net-zero economy, as these technologies can capture carbon dioxide before it enters the atmosphere and either reuse it or store it securely in the ground. The oil and gas industry is well-positioned to lead CCUS deployment, as they have developed many of the largest and most complex projects in the world-on time and on-budget. 

According to an article by McKinsey, the business case for CCUS works only under specific economic conditions, such as tax relief or the imposition of a carbon price. Without some kind of regulatory framework, CCUS does not create value by itself.

Balanced Portfolios

The demands of policymakers and investors are fast evolving. Shareholders are beginning to reduce their exposure to high-emitting resources, freezing out operators with the highest-intensity assets. 

Investments in solar and wind energy projects by the world's oil majors are expected to exceed $18 billion up until 2025, a Rystad analysis finds. With crude oil at $35 per barrel, renewable projects are starting to look just as attractive as oil and gas projects and could be the lifeblood that sustains oil and gas companies if oil prices are to persist. 

We have seen a growing trend from the top integrated oil and gas majors to diversify their portfolios and move towards alternative and cleaner energy sources. Furthermore, many of the smaller oil and gas companies who have been reliant on Private Equity funding for survival are now having to refine themselves as energy companies. This is a result of Private Equity firms having to adhere to more stringent ESG regulations.

It’s recommended that producers should start to re-balance their portfolios across the spread of emission intensity, preparing for possible risks from future policy scenarios and investment choices.

The highest -emitting reservoirs are nearly three times more emissions-intensive than the lowest. They may, therefore, become increasingly unattractive to develop in the future. 

The balancing of investments, production, and returns in today’s market environment can be a big challenge for E&P companies. Therefore, it will be key to find a portfolio of resources that can deliver the best results across a range of price scenarios. 

Conclusion 

It’s transparent that investment markets and regulatory pressures to achieve a net-zero economy will continue to rise. Energy demand is continuing to grow, and if the oil and gas industry isn’t part of the solution, there will be no energy transition. For the industry to succeed, they will need to embrace these changes, and be prepared to meet greater reporting requirements and financial measures.

The industry will undoubtedly need to be educated and equipped with the necessary tools to play a collaborative role in a low carbon future. Technology is evolving, and companies providing technology solutions have a big role to play in collaborating with the industry and helping operators navigate towards a low-carbon future. 

Given the large variances between oil and gas companies and their operations, it is recommended that policymakers should take an overarching approach, and set industry-related targets. With this approach, the reduction of carbon targets can be distributed fairly amongst all the industry participants of which they can all be held accountable for achieving these targets. Mistakes and delays are inevitable, it’s how quickly the industry can learn and adapt to change which will help towards an efficient transformation to a lower-carbon economy. Over the decades, upstream operators have responded to market and technological disruptions with innovation and resilience. Therefore, there’s little doubt that the industry will prevail once again.

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Technology has key role as midstream adapts
Technology has key role as midstream adapts

PITTSBURGH - The midstream sector faces significant challenges now, and the profitable response to some of those issues must include adopting new technology. That was the message of Sanjeev Daruka, head of midstream development for Siemens Oil & Gas in a keynote address Dec. 4 at the 10th annual Marcellus-Utica Midstream Con- ference & Exhibition.

“We need to focus on longer-term opera- tional excellence,” Daruka told attendees at the Hart Energy event. “The time for building and quickly flipping assets is gone, we have to hold the assets. In other words, operating expense is very important, it’s as important as capital expense.

“How do we get the costs  out and make our- selves more profitable? How do we get more reliable equipment out in the field so we don’t have to worry as much about personnel costs? To me, technology can make it possible.

“If you want to stay competitive, you need to think about lower capex,  lower land space, as well as lower maintenance obligations,” and those steps depend on rapidly advancing technology, he added. Commodity prices won’t stay low forever, he said, and action now will enable the midstream to enjoy greater profitability when natural gas and crude oil returns become more favorable. Centrifugal compression, Daruka said, is one important technology that can significantly lower costs as it increases reliability. Centrifugal compressors enable midstream operators “to deliver more with less” in comparison to industry-standard reciprocating compressors.

He said centrifugal compressors can reduce capital expenditures for a new natural gas processing plant by 20% to 30%, then reduce operating costs when a plant goes onstream due to lower maintenance expenses. Also, gas turbines typically can reduce permitting time and expense because of lower air emissions.

Midstream operators already are moving toward larger plants that offer lower unit costs, he said. An industry standard for plants with a capacity of around 60 million cubic feet per day (MMcf/d) has migrated toward a 200 MMcf/d standard, and 300 MMcf/d plants also have become more common. However, midstream firms can’t make such cost-lowering commitments without accurate production forecasts from their upstream customers.

And often, oil and gas producers can’t provide such projections. 

“We need to get upstream and midstream on the same page to achieve these economies of scale,” Daruka said. Producers must provide accurate numbers to their midstream service providers to gain the cost reductions they want. Personnel costs are a significant concern, he said, as a substantial number of midstream veterans retire—and replacing those veterans with new employees has proved difficult. 

“Where will they come from?” he asked. “The new generation is opting for very different careers. They are opting for technology jobs… are we planning for that? If not, we need to.”

That interest in technology plays into a potential strength for the sector if operators embrace the trend, Daruka emphasized.

Technology, in particular remote operation, will allow midstream firms to reduce personnel costs, but there are capital costs involved. 

“The [remote] sensors are not cheap, but computing power is very cheap. Transmitting the signal to the control room—the bandwidth—is also cheap. The whole digital world is becoming affordable,” he added. And it’s important to remember tremendous computing power allows thorough analysis of operating data “so we can fix problems in time” and avoid unplanned outages.

Daruka closed with a traditional, but not surprising, safety message. 

“My safety moment is to embrace technology,” he said. In doing so, the midstream will be able to meet many of the challenges it faces as the energy industry evolves through greater reliability and lower costs.

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Data-driven strategies for prospering in a changing energy landscape
Data-driven strategies for prospering in a changing energy landscape

The energy landscape is undergo- ing a fast transformation, and the hydrocarbon value chain’s very fabric is being tested as it will continue to be over the coming years. To help make sense of the changing energy landscape, Siemens prefers to explain the main drivers behind energy transformation using the 4-D model of “Decentralization, Digitalization, Decarbonization and Democratization”

Decentralization affects the midstream sector at both ends of the pipeline. Growth in unconventional upstream E&P has broadened the geographical dispersion of producing assets, and shorter production life cycles make determining the economics of serving new oil fields far more complex.

At the other end of the pipeline, decentralization means less utility-scale generating assets and more distributed energy systems that employ a mix of renewables, energy storage and smaller gas-powered generation units. The demand for high-pressure pipeline gas is far more dynamic than ever before and continuous electrification of end-users applications at all scales of usage is weakening reliance on pipeline gas.

Decarbonization

A movement toward decarbonization has affected all industries, as the results of climate change are no longer seen as isolated events floods, droughts and forest fires – suffered only by their impacted communities.

It’s now a global issue with effects playing out in the halls of government, on the financial trading floor, and in the board- room. An inflection point has been realized: Industry is collectively being held to account, and industry leaders must address the challenge or risk serious repercussions. Democratization has the potential to drastically disrupt the transactional conventions that have underpinned the energy industry for over a century. Diversity in energy supply – enabled in large part through advancements in peer-to-peer trading, generating and storage technologies and customer buying behavior – is creating new forms of energy independence that will impact the entire energy value chain.

Digitalization is the glue that will hold together and enable the energy transformation. After years of slow adoption, the oil price drop of 2014 catalyzed digitalization in the energy sector. Currently, it is recognized as an essential capability to keep companies relevant, profitable and sustainable.

To date, the industry has mostly applied digitalization to improve operational performance, reduce O&M costs, optimize production outputs and enhance environmental health and safety (EHS) safeguards. But companies rarely use digitalization to challenge and innovate their underlying business models. This significant oversight requires deeper examination.

Status Quo Models

For nearly 80 years, since pipelines were deemed a safer and more secure alternative to cargo ships traveling the U.S. East Coast and vulnerable to U-boats attacks, the transmission pipeline sector has had no reason to feel threatened by disruption. Supply shortages, demand uncertainty during contract capacity roll-off periods and hyper-competition in over-served markets are all challenges the conventional business model faced and overcame intac
So why should the current dynamics of the energy market result in a different outcome? Because this period of energy transformation is creating a new challenge unlike any other before: the economic viability of alternative means of energy supply combined with end- user sentiment towards decarbonization and democratization. Pipelines will no longer be the only means of meeting such high levels of energy demand.

With regulated transmission pipelines and within the context of these new challenges, the existing mechanisms of the conventional business model – those that are designed to share the risk of large CAPEX invest – do create a latent vulnerability that, at some inflection point, could accelerate the decline of pipeline dependency.

This won’t materialize overnight, nor will it be immediately apparent. But as is already being witnessed in some parts of Europe, alternative means of supply are reaching price parity to gas and end-users are switching.
For pipeline companies affected by this wholesale shift, when the decline in demand cannot be met with new customers or increased demand from existing ones, the inelastic cost of pipeline OPEX relative to capacity utilization means revenue losses transpose directly to the bottom-line.As demand shrinks, the option to increase rates merely serves to exacerbate the shift. Remaining end-users threatened by higher rates and incentivized by other factors such as energy independence, green corporate image and attractive government funding, are exiting the pipeline. Many end-users such as peaker plants are exiting the value chain altogether.

Solutions

Although pipelines will remain vital the energy value chain for years to come, midstream companies must consider how their position within market – especially in energy logistics – can generate new revenue streams and protect existing ones via enhanced end-customer value.
One midstream business-model innovation strategy is to diversify asset portfolios to compensate for diminishing revenues from existing and new transmission assets. Last year, for example, TransCanada, founded in 1951 as Trans-Canada Pipe Lines, became TC Energy. Although 93% of its 2019 revenue came from long-term, take-or-pay contracts, its new name reflects the growth in its distributed power generation and storage operations – now 8% of its EBIDTA, according to the company’s corporate profile.
An alternative is to find synergies in the existing asset portfolio. Consider how the Williams Companies, more than two decades ago as the Internet boom ramped up, decided to run fiber-optic cables through its decommissioned pipelines to generate additional revenue from otherwise non-performing assets. Eventually it sold its network for $2.5 billion and, a decade later, the rest of its telecom operations for $680 million.

While the latter instance was purely opportunistic and not reflective of today’s fast-evolving energy landscape, both examples show how diversification and synergy can be reasonable growth strategies.

Whichever strategy midstream operators pursue, we suggest they should seek unseen connections were opportunities to leverage their incumbent assets, capabilities, and key strengths in energy logistics exist. They should consider using a combination of digita- lization and domain expertise from across the energy value chain to better identify, quantify, and critically assess the strategic opportunities that are the best fit for their business.

To this end, Siemens is pioneering new approaches through its customer value co-creation (CVCC) methodology. CVCC involves operators, end-users, and ecosystem partners jointly addressing these industry challenges, creating solutions, and then, crucially, designing business models which unlock value for all parties.
The company is working with transmission pipeline customers keen to explore new business model options that address their pain points of declining gas demand due to energy decentralization in a regulated environment.

Using our consultancy and domain know-how across adjacent and distant sectors of the energy value chain, we critically assess the inter-dynamics of new technologies and business models, to enable new ways of addressing those pain points.
In evaluating the various strategic pathways, a data-driven approach is employed to evaluate and score economic attractiveness (cost vs. potential) and business affinity (ease of implementation vs. leveraging current capabilities) to determine those options with the right strategic fit for the customer.

Conclusion

“It is not the strongest of the species that survives, nor the most intelligent … it is the one most adaptable to change.”
This paraphrased quote from professor Leon C. Meggison as he commented on the observations of Charles Darwin, resonates particularly well with the current situation faced by the Energy sector as a whole.
The Energy Transformation is going to have a resounding impact on all companies and for midstream companies, adaptation will be the key to ensuring long-term business sustainability.
Opportunities to adapt, expand and write one’s own destiny exist now, but the doors to them will close as other players move to capitalize on them. Competitively, what might provide midstream operators with a clear advantage today may be industry table stakes tomorrow.

New Technologies

  • Advanced gas turbine, electrical and automation technology
  • New fuels (i.e., Hydrogen) and Energy storage solution
  • Blockchain and Peer to Peer energy trading platforms
  • IoT, artificial intelligence and data analytics

New Business Models Partnerships

  • Energy eco-system collaboration
  • Risk/reward sharing
  • Digitally enabled CAPEX/OPEX models

Authors

Matthew Watson is a project manager at Siemens Management Consulting, with 20 years experience in commercial, finance, sales and consulting, primarily in industrial arenas.

Michael Smith is Siemens head of Digital Strategy for Oil & Gas, with 20 years experience in engineering and strat- egy in the automotive, Aerospace, motorsport and energy sectors.

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