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Fossil Fuels Podcast Sustainability

Beyond Oil? Carbon neutrality by 2050 — Adam Czyzewski (Ep 44)

By Michael LaBelle — 2 months ago
Adam Czyzewski – Episode 44

This week we speak with Adam Czyzewski, the chief economist at PKN Orlen. I’ll describe PKN Orlen as a diversifying oil and gas firm.

I got the opportunity to sit down with Adam while I was in Warsaw and I’m extremely grateful for his time and his willingness to share his thoughts on the energy transition. It is possible that some listeners may object to my conversational style sit-down with a representative of the oil and gas world. I remember a conference I attended in 2019 when the Chief Economist for Equinor got not only a frosty reception but a hostile reception from the academic and policy audience at a conference on ‘Beyond Oil’.

My approach to understanding and assisting in the energy transition is to listen to a range of opinions. In this interview, you’ll learn that Adam – before he joined PKN Orlen 12 years ago, was an outsider himself. He shares his perspective and questioning of the sustainability around not just fossil fuels but global consumption of energy and materials. Even, as he points out – that plastic turned out to be too cheap and good for a consumer society. Nonetheless, the lightweight and durable properties of plastic make it useful for the energy transition.

Adam provides a pivotal acknowledgment and voice that says, yes, our present consumption patterns are not environmentally sustainable – but he also outlines how an oil and gas firm CAN make the transition to be carbon neutral by 2050. This seems unbelievable from an oil and gas firm. At least, I was highly skeptical before speaking to him. But as you’ll hear, more than what I thought, could actually be achievable. Particularly, when you consider how the firm is diversifying into wind farms and investing in developing new technologies.

Adam Czyzewski – Beyond oil

Depending on where you live and your background, you may be dismissive of what can we learn from a Polish oil and gas firm. As dedicated as the Polish government appears to be towards coal, it is important to understand the world, technology and firms are changing regardless of what is in the headlines. It may be a question of how fast we make the transition, or can we really believe fossil fuel firms will get rid of their fossil fuels? These are points for arguments. But at least from this interview, you’ll gain an understanding of the market forces at work that keep fossil fuels as petrochemical feedstocks in the near – if not distant – future.

One of the reasons I wanted to start a podcast was to share some of the interviews I have with experts while doing research. I’ve interviewed Adam in the past and I always found him very knowledgeable and holding a broad view of energy markets. In this episode, you’ll get more than an insight into the workings of oil and gas markets. You’ll get a thoughtful discussion on where companies are heading as they lower their carbon outputs and invest more into lower or zero-carbon technologies.

Transcript of episode
Podcast Sustainability

The Power of Hydrogen to the X: The Wärtsilä ship — Reetta Kaila (Ep. 40)

By Michael LaBelle — 3 months ago
Reeta Kaila – Episode 40

This week we speak with Reetta Kaila, Director for Sustainable Fuels and Environment at Wartsila. She holds a Doctorate of Sciences in Industrial Chemistry. And if you review her CV, and listen to our discussion, you’ll both see and hear her drive to both research and operationalize a more circular form of power production in both industry and academia. She is a true scientist in solving problems and holding substantial experience to solve some of the key technological challenges we are facing, such as using hydrogen and gas in power production and propulsion.

On the surface, Reetta differs from previous guests because she works for a large corporation, which is Wartsila. But as you’ll hear, Wartsila is a company that is the energy transition. That is, they are the ones building the power plants, the engines, and the batteries that underpin the energy and transport system of the current fossil fuel era, and as you’ll hear, the future era of lower or zero carbon engines and storage options.

Wärtsilä, which according to their website is a global leader in smart technologies and complete lifecycle solutions for the marine and energy markets. In 2020, Wärtsilä’s net sales totaled EUR 4.6 billion with approximately 18,000 employees. The company has operations in over 200 locations in more than 70 countries around the world. That is the general description from the website.

But what will you learn from my conversation with Reeta today?

First, you’ll learn about pink hydrogen. That is my teaser, and you’ll have to listen to the show to find out what is pink hydrogen.

Second, you’ll find out how and why designing and building power and pollution abatement equipment for ships drives innovative solutions. Designing for these small environments can translate into big innovations on land.

I really liked our discussion about working in a marine environment, particularly on ships. Because if you think about the Earth, it is one big giant spaceship. And as Reeta tells us, the engines of a ship can produce 90 MW which is the same as that consumed by a big city. If you think about that size we really are talking about massive infrastructure being built by Wartsila. It is this machinery is where the uptake in new low or zero-carbon technologies needs to be used to reduce carbon emissions.

Innovation, as Reeta discovered isn’t just done in a laboratory, but as she points out it is solving problems when a customer needs it. She uses an example of what to do with the gases coming from boiling heavy oil (or bulk oil) on a ship. Well, they discovered you could mix it with LNG and feed it back into the engine – and wala, not only do you get more power, but you get innovation.

Among, other topics, we learn about Power X, which is a program that looks to understand what to do with the extra electricity on the grids created by renewable energy. Some of it can go to battery storage, or even be turned into hydrogen for longer storage. Our discussion on hydrogen comes about halfway, but you’ll find it really exciting when we discuss the different properties of hydrogen and gas. And how you can even mix 25% hydrogen and 75% natural gas and power an engine. However, just a word of caution, don’t try this at home. 

We end the interview with understanding the role of society and with a hope that by 2050 we are running on pure hydrogen. Overall, I found our conversation fascinating for understanding what are the new technological – and even policy – challenges for companies producing the machinery that is now powering our energy system today and tomorrow.
Climate Change Fossil Fuels Podcast

The Carbon Storm of 2021: Energy shortages and high prices — Michael LaBelle (Ep. 39)

By Michael LaBelle — 3 months ago

We can speak of the ‘Carbon Storm of 2021’ which reflects the new reality of Climate Capitalism, which Michael spoke about in episode 31. We are now paying the price of the energy transition, and how consumers, governments and industry react and work together to make this transition will also determine the price we pay in the short and the long-term.
Fossil Fuels

Not so Fast! The Carter Doctrine and cheap oil in the Covid-19 era

By Michael LaBelle — 2 years ago

The tremendous economic and security gains the United States made in domestic oil and gas production in the past 10 years fostered a global power rebalancing. The withdrawal of the US military from the Middle East corresponds to the rising US self-sufficiently in oil and gas. Shale oil and gas underpin this dramatic reconfiguration. According to Tina Soliman Hunter, Professor of Energy, Environment, and Resources Law, at Macquarie Law School, University of Macquarie, this disengagement may now end. The once spurned US military protectorate of the Middle East may hold renewed value to ensure a global economic recovery and benefit US shale oil producers.

The Covid-19 economic collapse created a price plunge of global oil and gas prices. Marked by negative oil prices in April 2020. The overall trend moved from above $50 a barrel, to a June 2020 price of somewhat above ten dollars. Before the pandemic the US had recently become the top oil and gas producer in the world, reliant on hydraulic fracturing technologies to extract oil and gas from the plentiful shale formations. This performance created a pricing band for global oil which the US could influence from its production capacity. The theory was global oil prices would be influenced by this shale pricing band.

Professor Tina Soliman Hunter, Professor of Energy, Environment, and Resources Law, at Macquarie Law School, University of Macquarie in Australia

The rapid and swift drop in global oil and gas resulted in the band breaking. Low prices now favor those with conventional oil wells, which can’t easily stop the flow of oil out of tapped wells. Middle Eastern producers sit at the bottom of the pricing scale. The cheap oil of the region may now be more valuable to sustain a weakened global economy and necessitate the US military presence to ensure access and low prices for US and global consumers. For Professor Soliman Hunter, it is a return to the Cold War era of the Middle East limiting external interference in the region.

Support for the traditional US oil allies of Saudi Arabia and Kuwait means a reassertion of the Carter Doctrine. A doctrine that followed previous policies but was elucidated by President Jimmy Carter in 1980.  The doctrine states the US will use military force to keep out external influence. In the 1980s this was aimed at the Soviet Union after the Soviet invasion of Afghanistan. Looking at the Middle East today, and the US withdrawal from Afghanistan, Iraq and Syria both the determination to exert influence and the retreat of this intent are apparent.

There is an almost corresponding rise of US as a major oil and gas producer with its declining role in the Middle East. It is hard to separate the actions of the US and whether President Trump blew this agreement up for the hatred of foreign US engagement and international coalitions, or because of the US self-sufficiency in oil and gas. Nonetheless, Middle Eastern dynamics around military engagement and the price of oil and gas were shifting under President Obama. In addition, the shale revolution underpinned the US economic recovery after the 2008 financial crisis. Keeping oil and gas cheap. Is it possible a similar cheap fossil fuel policy will underpin the Covid-19 economic recovery?

Source: EIA, 2019

According to a Federal Reserve Bank of Dallas report, the US may be reliant more on sustained investment into the oil and gas sector, rather than low prices. With limited ability of consumers to take advantage of low prices, due to stay-at-home orders, and a general curtailment of economic activity, low energy prices hold limited benefits for the economy. Rather, it may be the lack of financial spending in the oil and gas sector that will reduce economic activity even further. 

“In the current environment, the sharp reduction in capital expenditures by oil companies explains why this oil price decline, on balance, actually hurt U.S. investment spending—and hence, economic growth”

The US the shale boom previously acted as a price floor and ceiling. Not allowing oil and gas prices to drop below or rise above a certain level. Shale fracturing to extract oil or gas could either done or not done, depending on the price. With a general band around $50 to $60 per barrel, oil producers could withstand previous pricing wars with OPEC countries, by using more efficient techniques, but they could also act as regulators to high global oil prices. The new dynamic exposes how much the US is reliant not only on low prices from shale production, but on the investments going into the shale plays. 

Professor Soliman Hunter demonstrates this link. “Shale relies on continued hydraulic fracturing, so there’s always on costs, ongoing costs. So you need to continue to fracture in order to get continued field development. And so when there’s no appetite for that, and there’s no sort of economic drivers to continue, then essentially your incomes going to dry up.” And not only the income for the company disappears but also for the workers and the communities where these workers live and work, along with the larger economic ripples through communities.

Professor Soliman Hunter talks about shale and its reliance on continued hydraulic fracturing.

Due to the US competitive price advantage from shale wells, the country essentially had a freer rein in global politics. There was reduced reliance on OPEC countries to maintain low oil prices underpinning the country’s economic growth. The use of the military to ensure US economic domestic and international dominance could be seen as waning. In fact, the ripple effects of shutting down shale and conventional wells in the US demonstrates the economic reliance on investments into oil and gas well developments. This further calls into question the ability of the US to economically move away from domestic fossil fuels for climate change targets.

Internationally, the fall in price may reset the US relationship back to what it was before it was a giant producer of oil and gas. This changing role of the US from global consumer to producer shifts the geopolitical perspective and assumptions underpinning the Carter Doctrine. For Professor Soliman Hunter, this was questioned, “in the last half a dozen years, I’ve looked at the Carter Doctrine and thought, is that really relevant now that the US is producing, you know, 12 to 13 million barrels of oil and gas a day?” With the US the top oil producer why would it need the Middle East to sustain its oil hungry nation? According to Professor Soliman Hunter, 

“The US has just become the biggest oil and gas producer in the world. And in three months, that’s been wiped out, their gains that they’ve made in the last 10 years have been wiped out, as shale producers cannot sustain that. So, where does that leave us in terms of the value of the Middle East and Saudi Arabia in particular?”

Professor Soliman Hunter explains the Carter Doctrine.

The US military presence in the Middle East can act both as a protector of oil supplies and limit conflict risks. Lower prices through geopolitical stability can ensure some economic recovery. However, tension in the Middle East, can also increase prices and benefit US producers, if oil climbs above the break-even points for domestic producers. Military tension can influence the price both ways, and influence the US economy, along with oil producers as well. The abrasiveness of the Trump administration may just benefit from the unstable relationship with Iran and any military tension. The Persian Gulf Wars may be done, but low-grade conflicts also move markets and ensure the US stays a top oil and gas producer, benefiting its economy and security.

The current state in June 2020, is the huge rise and self-sufficiency of oil and gas production in the US is stagnate. Production is shut down and shale wells abandoned due to their higher operating costs. The US shale industry is broken and it accomplishes previous attempts by Russia and Saudi Arabia to reassert their former dominance over the global oil economy. It is hard to see a clear short-term path when US shale producers reclaim their global influence. Nonetheless, falling company investments into oil and gas field development expresses the significant economic impact technologies and innovation have in the US economy. A US transition away from fossil fuels may be even further away than projections may hold.  Geopolitically, it remains to be seen the importance of the 40-year-old Carter Doctrine in an era with more renewables but drastically low oil prices. Nonetheless, US military presence can influence markets both ways. Professor Soliman Hunter succinctly summarizes the future. “This is a new world order now, where this is going to lead us. I have no idea. But it’s exciting.”

References:

Federal Reserve Bank of Dallas. “How Falling Oil Prices in Early 2020 Weakened the U.S. Economy.” Dallasfed.org. Accessed June 8, 2020. https://www.dallasfed.org/research/economics/2020/0519.

LaBelle, Michael. “MyEnergy2050: Oil and Gas Markets in the Covid-19 Era: Interview with Tina Soliman Hunter.” Fossil Fuel Markets, n.d.

Plante, Michael D., and Kunal Patel. “Breakeven Oil Prices Underscore Shale’s Impact on the Market – Dallasfed.Org.” Federal Reserve Bank of Dallas, May 21, 2019. https://www.dallasfed.org/research/economics/2019/0521.

U.S. Energy Information Administration (EIA). “U.S. Total Energy Exports Exceed Imports in 2019 for the First Time in 67 Years.” Today in Energy, April 20, 2020. https://www.eia.gov/todayinenergy/detail.php?id=43395.

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