What place does the industry have in a more environmentally-conscious society?
While oil and gas continues to power most of our everyday lives – the industry’s environmental impacts are causing more countries to switch to renewable energy. But is this switch really feasible?
In this episode, Amelia is joined by Professor Claus Otto and Dr Roberto Aguilera from Curtin University’s Oil and Gas Innovation Centre. They break down why countries are switching away from oil and gas, how companies are improving production and reducing their carbon footprint, and why the industry will still be relevant in the coming decades.
Curtin University supports academic freedom of speech. The views expressed in The Future Of podcast may not reflect those of the university.
Music: OKAY by 13ounce Creative Commons — Attribution-ShareAlike 3.0 Unported — CC BY-SA 3.0 Music promoted by Audio Library
You can read the full transcript for the episode at
This is The Future Of, where experts share their vision of the future and how their work is helping shape it for the better.
Amelia Searson (00:09):
Hello, I'm Amelia Searson. While oil and gas continues to power most about everyday lives, the industry's environmental impacts are causing more and more countries to consider transitioning from oil and gas to renewables. But is this switch really feasible? With me to discuss this topic are two experts from Curtin University's Oil and Gas Innovation Centre. The centre's director, Professor Claus Otto, and senior research fellow, Dr. Roberto Aguilera. Thank you both for coming in today.
Professsor Claus Otto (00:37):
Dr Roberto Aguilera (00:37):
Thanks for having us.
Amelia Searson (00:38):
So just to get started, I understand that there've been several countries, including China, South Korea, Japan who have announced their commitment to drastically cut carbon emissions, and move to more renewable energy sources. Yet Australia has revealed that it's going to boost its oil and gas production. Can you explain to me what's going on with this?
Professsor Claus Otto (01:03):
Let me kick it off first. So it's not only these Asian countries who are doing this or announcing, it is also the EU and even the America, the United States, they sort of pledged that they want to reduce their emissions net by the mid-century to net zero. How they're going to accomplish that, that's still the question out there. So it is nice to say we will do this, but it's a different thing of show us. So I think that's a challenge, but Roberto has a bit more insight to what's going on in Australia.
Dr Roberto Aguilera (01:40):
Well, I'd say that post pandemic, this has become a very topical issue and it has accelerated the push for an energy transition. That's why we're hearing all of this narrative around the end of oil and gas and a move to renewables.
Amelia Searson (02:01):
Who's talking about that?
Dr Roberto Aguilera (02:02):
Everyone around the world. As Claus said there are many countries that are making these pledges around mid-century. The reason is that there's immense pressure right now on governments and on oil and gas companies in particular to accelerate this kind of transition. This pressure comes from the public, from their own shareholders, from policy makers, and the companies are realising that in a sense their survival depends on navigating these issues. To do that they are trying to do things like reduce emissions and act more responsibly in general, to meet principles related to environment, social and governance. You may have heard about ESG Goals, very popular today, and these companies are trying to reach those objectives in order to have that licence to operate and to be able to raise money from financial institutions and get a favourable treatment from governments.
Amelia Searson (03:13):
It's interesting. I feel like Australia follows in America's footsteps in a lot of ways, but just from what I've read and heard, Australia hasn't made such a drastic commitment to move to renewables or to reduce the oil and gas industry, I suppose. Would you agree with that?
Dr Roberto Aguilera (03:31):
Yeah. I didn't really touch on that. Claus had mentioned Australia, I forgot to mention. But yeah, I mean, we're a very important natural gas and LNG producer and exporter especially here in WA, it's an important part of the economy. Currently the government you may be aware has not made a particular goal for achieving this net zero. Though, they have said that it would be desirable and they're aiming, like everybody else, middle of the century, but they're also being realistic. Well, it as Claus mentioned, it's one thing to make the announcement, but it's real concrete action that will determine outcomes. Here, this government in Australia sees the existing strength in natural gas as part of the solution so that it can not only help us recover after the pandemic economically, but also lead to de-carbonisation of the energy sector here and in Asia.
Professsor Claus Otto (04:32):
So the LNG and gas is considered sort of a transition fuel, although there's a debate around that now as well. But we shouldn't forget there are lots of jobs attached to that industry. So it's not something you can turn off, because where are these people going to work? So the same issue with the coal industry by the way. You need to transition slowly into something else and create jobs. It's very important for the government and of course the revenue or the royalties they get.
Dr Roberto Aguilera (05:04):
Mm-hmm (affirmative). Not to mention the energy security element. You wouldn't want to walk away from all of these resources and then have to depend on other countries to provide them for you.
Amelia Searson (05:19):
So obviously oil and gas are scarce resources. They're natural. So they will eventually run out. At this stage have we used most of the planets oil and gas reserves? And when are we looking at them running out?
Professsor Claus Otto (05:32):
No, I think the consensus is at the moment there's enough oil and gas in reserves. But it's proven to be difficult to find the last drops or gas bubbles. Reservoirs are deeper, it's harder to get to the drilling, it’s more challenging. It's very expensive. So at the moment oil companies have on the books lots of reserves, which they need to produce or monetise eventually as long as demand is there. So there's enough gas all around, but it's a matter of do we actually need it for the decades to come? And so that's why you also see that companies are not investing in exploration for new oil and gas, at least not the risky ones, like in deep water and so on. So that's what we're seeing at the moment. The oil is price very low at the moment, so there's no incentive actually to look for more oil and gas.
Dr Roberto Aguilera (06:32):
Yet over the past 100 years or so there really have been concerns about shortages of natural resources, whether that's agriculture, or land, or crude oil. Just over a decade ago, I mean, you might not remember Amelia, but I do and Claus probably does.
Professsor Claus Otto (06:50):
I'm old enough.
Dr Roberto Aguilera (06:51):
There was a serious peak oil supply debate. There was concern that there were insufficient resources underground to help fuel the global economy, and it would have devastating consequences for humanity. Mostly though those fears have subsided because as we mentioned over the past decade, there has been a surging oil production, new reserves, lower prices. And therefore the fears appear to be overstated. My own research on this subject shows that in the past depletion of oil and gas hasn't really been a threat, neither in the physical, nor in the economic sense and that it's unlikely to become a threat in the foreseeable future.
Amelia Searson (07:42):
Do you think that it's possible to simultaneously increase oil and gas production and decrease the environmental footprint? Do you think there's a way to sort of achieve both? I suppose.
Professsor Claus Otto (07:54):
Yeah. So I mean, the companies have also announced, by the way that they want to reduce their carbon footprint – the Woodsides, the Shells, the BPs, BHP, the mining companies. They have all announced that to the public and their shareholders. So they want to continue producing, but they also want to address their CO2 emissions. You can do that with technology like carbon capture and storage is one of them. You can offset your carbon with planting trees, for example, or different farming practises. Savanna burning, which is an Aboriginal process, by the way, it's also a means all for carbon offset technology. So that's what companies will look into more and more. But at the end of the day, it's about costs.
Amelia Searson (08:49):
Do you think that's happening at, I guess, a quick enough rate to be able to decrease the environmental impacts?
Professsor Claus Otto (08:56):
In my view, companies are waking up at the moment, because they've made these pledges. Is that, "How are we going to do this?" It's not that easy that you can simply say, "We're going to inject all the CO2 in the underground." That's too expensive. So they're looking at innovative technologies. Curtin is working on this to offset that carbon footprint. You may also buy carbon credits on the market. So that's another technology companies are looking into. But I think they're realising now, "This is coming. We need to do something because we promised."
Dr Roberto Aguilera (09:34):
I would say that natural gas in particular and in line with Australia's plans can also be compatible with a low carbon future. I want to give one example about in, or rather in North America, in the US, that country had unconventional shale gas revolution. Production went up, prices came down and that led to a decommissioning of coal-fired power facilities and their replacement by plants run on gas. That's reduced CO2 emissions in that country to levels not seen since the 1990s. So I think similar reduction in emissions can happen in this part of the world, Australia, Asia, to the extent that natural gas replaces dirtier coal in electricity generation.
Amelia Searson (10:25):
Roberto, can you explain how new technologies are improving oil and gas production?
Dr Roberto Aguilera (10:30):
Well, the unconventional shale oil and gas revolution that I just mentioned was the result sort of an unprecedented technological and productivity improvement. Most of that had to do with advances in horizontal drilling and hydraulic fracturing, for example, very long horizontal wells that can extend for many kilometres in length. Simultaneously they perfected this. They brought costs down and it led to that surge in oil and gas production and increased recovery of the reservoirs underground. Previously, it had been uneconomic to produce this resource. It was locked in very tight rock formations and it couldn't flow, but all of that changed. Closer to home on the natural gas side, in LNG... Over the past decade here in WA, we had a whole bunch of LNG projects come on stream.
Dr Roberto Aguilera (11:28):
They had been planned while prices were very high, during the commodity boom that we all remember. Then they all came online at the wrong time when the market had crashed. So they were in the low price environment and it became necessary to reduce costs to improve productivity. They've learned that lesson. So they've done things like collaborate between the companies, standardise equipment, have better early stage planning, and introduced smaller, more flexible technologies like floating LNG, which is much less costly than the massive projects of the past. Also, for consuming countries, this floating import infrastructure is being considered for LNG. It enables poor countries who don't have that financial scale to construct massive onshore import facilities, the opportunity to increase their gas usage as well.
Professsor Claus Otto (12:22):
I think that's an exciting technology that Curtin is working on and renowned for is on digital data, data analytics. So that includes machine learning, and that improves productivity, makes it safer as well. Robotics automation is another one. So that's what industry is implementing, and Curtin research is actually quite essential in providing these opportunities of these new technologies. So that's sort of optimising production basically, and that there are lots of improvements that still could be gained. But they're sort of deciding, how much is that going to cost us? And is it actually a benefit to the oil price on our products?
Amelia Searson (13:11):
Before I ask a question about what Curtin is doing in terms of all of this, Claus, would you mind explaining briefly what a decommissioning oil is?
Professsor Claus Otto (13:23):
Yeah. So decommissioning is a hot topic for Australia now. It is about decommissioning existing facilities, offshore and onshore. So we're talking about platforms, pipelines, wells. In Australia, we have hundreds and hundreds of wells, not only from the oil and gas industry, but the mining industry, water production, like water corporation and so on. Eventually once you stop producing, the legislation says, "You will have to decommission and remove these facilities". That's not only the hardware, but also the waste, for example. Now offshore it's a challenge and it's very expensive, but every operator has a liability on his books. "You will have to decommission your infrastructure and your asset once you cease production" – that's what the law says. And there are regulations around that. Companies are now looking at options, how to reduce that cost for decommissioning, and Curtin is working on that.
Professsor Claus Otto (14:29):
So for example, what does it mean if you leave a pipeline or a platform on the sea floor? So that means you don't have to bring it to onshore and then convert to scrap and sell the metal. So there are issues around that in terms of environmental impact. The legislation is not ready yet to say, "Yes, you're allowed to do that". So at the moment Curtin is working on that. What does it mean if you leave pipelines, which may have polymer coatings? Does polymer coating degrade? And does it have an impact on the marine environment, for example? So we're working on that. For the companies, of course it could be cost saving thing. You don't have to bring it to onshore. So Curtin is working on decommissioning.
Professsor Claus Otto (15:20):
We're working with the business school on this as well, and the school of law, because this is about legal issues, liabilities, but also the economics, of course. So it's cross-disciplinary because we work on this across all the faculties. The Commonwealth has announced that the liability of the infrastructure is actually with the first owner of that asset. So there are examples out there already where the government is saying: "If you want to leave that field or that asset, you have to clean it up. You can't sell it onto a third party." So that's new for Australia. The North Sea is doing it already, the UK. Australia is waking up. So this is an interesting space to work in.
Amelia Searson (16:04):
What other research is Curtin currently doing to address our future energy needs?
Professsor Claus Otto (16:09):
There's lots going on. So we have very good scientists and professors working on hydrogen. So the storage of hydrogen, so we can use it for transport. We have an institute working on biomass, converting biomass into fuels, which can be carbon neutral. We have a CRC for Future Batteries. So that's our future energy. We work on smart cities, smart grits, renewables. There's lots going on.
Amelia Searson (16:41):
For students studying oil and gas, how are they being prepared to address changes in the industry? Because obviously it's all very tumultuous, I suppose.
Professsor Claus Otto (16:49):
Yes. The students are quite concerned of course, about the climate change as are others, and vocal. On the other hand industry is still looking for the engineers, mechanical, chemical, petroleum engineers. Curtin will continue teaching these engineering degrees and business degrees. At the same time, students have options nowadays to enrol in units that are a blend of both. Sort of more the traditional engineering, but also with added units on data analytics, environmental assessments and all these kind of things. So it's pretty broad and companies are looking for these graduates for their next hires.
Dr Roberto Aguilera (17:32):
I just add that, as oil and gas is still quite an important part of the energy mix today, three quarters to 80 per cent, also students are being taught that if they go into the industry, it will be very important for organisations to engage in the dialogue with their communities, with policy makers and so on. So that they'll be able to act sustainably, reduce their environmental footprint. All of this will be very important so that these organisations can continue to thrive.
Amelia Searson (18:09):
Collaboration amongst all of these different areas in our engineers, town planners, it's all very, very important. So Roberto, even if we stopped using oil and gas for our everyday needs, fossil fuels are required for products ranging from jet fuel to asphalt. Do we have any viable alternatives for these applications do you think?
Dr Roberto Aguilera (18:32):
Sometimes. It depends on the sector. The most important end use sector for crude oil is transportation, mostly road transportation, but also in the air and on the sea. There isn't a large-scale substitute here, except for say electric vehicles and hydrogen fuel cell vehicles, but they still represent a tiny portion of the market. They're on the rise, but it's going to take some time before they can really displace, say, the internal combustion engine. Another important sector for crude oil is the petrochemical industry, which is the sector that manufactures products we use in everyday life. All kinds of materials ranging from plastics to pharmaceuticals, to cosmetics. And there too, it's sort of hard to replace crude oil.
Dr Roberto Aguilera (19:21):
Natural gas is sometimes a substitute, but it's difficult. This is expected to be an important source of growth for the oil industry longer term. There is some pushback against the use of plastic, so that could slow the demand growth somewhat. But really it will take time to develop these alternatives. And importantly, it has to be affordable to consumers. If an electric vehicle, for example, costs much more than a normal car, a lot of people will be hesitant, especially those on modest incomes.
Professsor Claus Otto (19:57):
And you have no recharging stations.
Dr Roberto Aguilera (19:59):
Another good point, the infrastructure, you need that. We live in WA, in Perth. These are big places with long distances. To have a decent quality of life you generally need a car. Some people take the train and ride a bike, but most of us not.
Amelia Searson (20:15):
Yes, we've definitely got that urban sprawl, don't we?
Dr Roberto Aguilera (20:17):
Professsor Claus Otto (20:17):
Amelia Searson (20:19):
So something that I think is very interesting is to use something like, to get a wind farm, you need steel, you need mining. So what place do you think that mining has in terms of transitioning with renewables?
Professsor Claus Otto (20:34):
Mining in my opinion is essential. We need the critical metals, like the batteries, wind power, lithium, all these. That's not going away, but also the mining industry is rethinking how they can reduce their carbon footprint in terms of producing these metals out of their smelters and so on. So that's coming. They're thinking about the hydrogen or solar plants. So I think that the mining industry is vital for all these new technologies, actually. Because we need these metals. These precious metals as well and these rare metals, especially now with all this conflict in the world about who has these resources, it's important. Australia is self-sufficient, actually.
Amelia Searson (21:28):
Now I'll pose that same question, but in terms of oil and gas, what place do you think they have in our future?
Dr Roberto Aguilera (21:37):
Well, and sort of continuing on from the last question, and back to natural gas, which is part of what Australia is pushing for the future. It can also lead to widespread renewable energy development. In that we know that the major limitation with renewables like solar and wind is that they are intermittent. You have to use the resource, the electricity generated when the sun and the wind is actually available. And when it's not, you need a backup for that intermittency. And this is where natural gas, the cleanest of the fossil fuels, can play an important role. Longer term I'd say I concur with most forecasting organisations that see continued consumption growth of oil and gas for several decades.
Dr Roberto Aguilera (22:32):
It's very difficult to transition quickly in the short term, especially in the developing world. These are countries that are in earlier stages of economic development, and they depend on abundant and affordable resources compared with us in the industrialised countries where we of course can afford more expensive alternatives. And we're in a more advanced stage of economic development where we depend on services for our economic growth. So we don't use these very energy intensive industries to establish infrastructure and heavy industry in the same way that the developing world does.
Professsor Claus Otto (23:12):
Yeah, we shouldn't forget that... I mean, yes, you can't stop suddenly oil and gas production and you can't switch over overnight. I mean, it takes decades. There are consequences in doing this. We need to think about that. And the society, how society needs to adapt to that. Society not only has to adapt to climate change, but it also has to adapt to different energy sources. Not everyone can afford it or has access to it. So it is a very important society issue as well that the community and the politicians need to address.
Professsor Claus Otto (23:51):
So, The Curtin Future of Work Institute has a very important role to play in that transition – because it's not only about technology. That's why this future energy Curtin is working on at the moment does not just include science and engineering – it also includes the business school and humanities. It's a very important aspect we need to understand. They call it the 'Just Transition'. It's actually about jobs. It's re-skilling, preparing the next graduates for the decades to come. So that takes time. You can't just switch off and on.
Dr Roberto Aguilera (24:30):
Also Claus, the continuity of policy support over many decades will be necessary. That can be tricky sometimes for politicians to introduce these measures to reduce emissions like taxes on carbon or enforced regulation or subsidies to alternatives that emit less. But it also is a requirement for alternatives to gain a significant share in the longterm energy market.
Professsor Claus Otto (24:59):
Yeah, that's true.
Amelia Searson (25:01):
Yes. It's very interesting time we're living through. All of these evolving resources and it'll be very interesting to see what happens in the future. Well, that's all we have time for today. Thank you Claus and Roberto for joining me and sharing your expertise on this topic. If people want to find out more about both of you and your research, how can they reach you?
Professsor Claus Otto (25:23):
So the Centre for Oil and Gas Innovation, which is maybe not the most appropriate name anymore, does have a website. So our contacts are on there, our other podcasts are on there. I have a LinkedIn account. Roberto, you have one too, I believe.
Dr Roberto Aguilera (25:39):
Yeah. And that's it for social media. We're not up to date with all the extras: Twitter and what have you.
Professsor Claus Otto (25:47):
Don't do that.
Amelia Searson (25:49):
You've been listening to The Future Of, a podcast powered by Curtin University. If you'd like to share your thoughts on today's episode, or have a question, send us an email at email@example.com. If you liked this episode, don't forget to share and subscribe to our podcast. Bye for now.