Reinventing for the future - decarbonising the oil value chain
Now while the above steps will ensure a long runway for oil and gas companies, it is also imperative that they pivot towards the inevitable low-carbon future. There are already heightened sensitivities on environment and climate, and sustained pressure from stakeholders.
The first step towards decarbonisation can be by building a circular economy in production and usage – this is already being done in some petrochemicals. Accordingly, the refining slate needs to be re-designed or modified for maximum flexibility to make inter-fuel choices without significant challenges or disruptions as markets shift away from fuels such as diesel, ATF, LPG etc. over time. The decarbonisation strategy would also require a push towards a more direct oil-to-chemicals route, maximising chemicals more than liquid fuels.
Also, as more efficient, and focused yield refinery capacities come into place, it will be critical for older and inflexible refineries with higher energy intensity and emissions potential, to be phased out. In addition, refineries need to enhance their green energy usage for both energy and feedstock requirements, including for renewable energy and green hydrogen over the next decade, while further scaling up production of biofuels for blending in transport fuels.
So to conclude, while the oil and gas sector is already on the path to revival to pre-COVID-19’s demand levels, the key point to note is that a 3-D reinvention is required for the sector to take it to new levels through focus on domestic self-sufficiency, digitalisation across the value chain and move to decarbonisation. These three dimensions will lay the foundation for the sector to adopt new technologies for transitioning to a low-carbon world and ensure affordable and sustainable access to energy across India. The first step towards accelerating these use cases for energy transitions will be to ensure a level regulatory playing field and to enable strong public-private collaboration in low/no-carbon investments – the time to put the pedal to the metal is now.
For more on this, read KPMG in India’s publication ENRich 2020 : The Net Zero Future