In dialogue with Equinor: The details and dilemmas around the energy transition
Equinor’s Carri Lockhart and Johannes Wiik, Deloitte’s lead partner for energy in the Nordics, discuss the dilemmas and challenges around the energy transition. Here is a summary of their discussion.
Carri Lockhart is a petroleum engineer with 30 years of experience in the industry. She joined Equinor five years ago and holds the position of executive vice president for technology and innovation.
She begins by pointing out that the industry’s license to operate is changing. Society expresses a strong demand for decarbonization, and so do investors if they are to grant companies access to capital.
- The climate focus is not a license to operate anymore, it has become a license to exist, she says.
Lockhart says the willingness to improve and do what is right for the climate is strong. The challenge is to find the right solutions and speed up the energy transition. She emphasizes the need for strong collaboration between companies, societies, and governments so they can find the technological solutions and shape the fundamental policies to support markets. Predictable regulations will make it easier for the industry to adjust, so these should also be in place.
The path towards net zero emissions
Internationally, the experts are emphasizing the need for urgent action and the need to reach net zero emissions by 2050. According to the International Energy Agency we will not need new oil discoveries if we are to meet the Paris agreement.
Lockhart says the companies looking at ways to reach these goals have some common thoughts and concerns. They express the need for coordinated global efforts from authorities, from technology and innovation companies, consumers and from the industry alike.
A prerequisite for the net zero emissions goal is significant growth in renewables, something she believes the industry is targeting well. She adds the need to focus on hydrogen, as well as carbon capture and storage (CCS) which are still very immature.
Since the markets are not established, collaboration needs to be quite robust for them to be enabled. The technology needs to be further evolved to make sure that green energy solutions are affordable and competitive.
- The energy transition is not moving fast enough. The speed of transformation and the industrial scaling of things like CCS and hydrogen depend on the market frameworks, the effect of legislation, predictable regulations, and technology readiness, says Lockhart.
The decreasing demand for oil and gas and the increasing demand for energy poses a challenge.
- Over 1 billion people still live without the basic energy needs being met. To disrupt oil and gas as an energy source is difficult to see happen because of the needs that must be met on a global basis. The focus must be on providing energy on the most sustainable, safe, and secure way possible, Lockhart says.
At the same time, there are some tradeoffs like costs and technology requirements, and things to manage like storage and intermitted demand. Lockhart believes we must lower the total cost of energy, improve safety, and have effective infrastructure.
- In a sense, we are trying to cross a bridge that hasn’t been fully built, she says.
To be successful and relevant, both society and the industry need to have trust in you, according to Carri Lockhart.
- Equinor has lost essential trust over recent years. Relevancy also means being actively engaged in the energy transition, and the industry hasn’t driven decarbonization fast enough, she says.
Lockhart says Equinor is focused on transparency and more consistent execution in performance management.
- We need to deliver on our promises and work more closely together especially on oil and gas, renewables and decarbonizing the technology that is required. Lastly, we need to think about energy consumption and how much we are spending to produce the energy, she says.
For Equinor it is important to build on their long history of technology. Lockhart thinks being a world leader will help attract the talents they need for future growth and the energy transition. She believes that if they bring technology and digital innovation together, they are able to accelerate how they scale up solutions and develop new ways of working.
Lockhart mentions the need for companies to share data, something that will require a mindset shift.
- We need to focus on how we approach data sharing. There are many tech success-stories that are results of collaboration and data sharing. We need to start thinking about how we can mutually benefit by sharing, says the director.
New business models
Equinor has a diverse set of business models that differ in capabilities, skillsets, use of technology, and talent.
Carri Lockhart has been part of the transition team and has helped shape the company’s strategy.
- We outlined our ambitions and decided that the different areas like oil and gas, renewables and low carbon value chains must work together to have reliable and sustainable energy production. There are quite strong synergies between oil and gas and the low carbon solutions and the subsurface management when it comes to carbon capture and storage. We can leverage these synergies when developing the CCS as well. We need to move more towards one design that we implement repeatedly and scale broadly, she says.
Lockhart points out that there are also some differences they need to work through, because if they are not managed right, they could be exposures.
Balancing sustainability needs
We still live in a very imbalanced world. 50% of the world owns 2/3 of global income and they use more than 1/3 of the energy. You have lifestyles among those 50% that many would classify as unsustainable and then on the complete opposite side you have parts of the world with no energy security at all.
- The challenge is to balance the progress on the climate agenda and the competing priorities of meeting the basic needs of people. In many places where they do not have clean water, climate action is naturally not the top priority. The western world has to be a driver, but also a big supporter and our behaviors need to continue to change and improve. The biggest impediment is a lack of understanding of the needs of other societies. At the same time, each region of the world has to be committed to this, otherwise we cannot reach our goals, says Lockhart.
In the future, Carri Lockhart hopes we can look beyond our western world in the narrative and appreciate the global energy security basis.
- The world must shift to more clean energy in total, and at the end I believe that all energy sources will be necessary to meet the global demands. We need to make sure that people have access to clean, affordable and reliable energy in the future no matter where they are. I hope for less polarization of the debate in the future and that we work together, she concludes.