Two months ago, Lux held its Houston Forum “Made in America: The Energy Transition.” This event brought together key stakeholders in the oil and gas, chemicals, and utilities value chains to understand how the energy transition may impact each industry. Today, fossil fuels form the backbone of the global economy, powering the way we move and the everyday products we use. While previous decades saw increasing amounts of research and venture investments in climate tech, today, government regulations and subsidies are intersecting with maturing climate-related technologies and powering the energy transition to make the 2020s the decade of deployment. The time for inaction by oil and gas companies across the value chain is long gone; companies must have a vision not only for how their business can navigate the energy transition but also for how to identify what their business will ultimately look like in a future net-zero world.
- Oil and gas companies can pursue five strategies: keeping the status quo, providing all kinds of fuels for transportation, becoming a vertically integrated chemicals company, evolving into a carbon capture company, or embracing electrification and becoming a utility. Companies must craft their strategy, considering their current position on the value chain, their size, and their geographical focus.
- Carbon capture, whether point source or direct air capture (DAC), is an inevitable piece of the energy transition. While a major part of this demand is to meet climate reduction goals, with economics for DAC powered by subsidies and the value of carbon credits, captured carbon should be viewed as a feedstock for the many industries that use carbon that currently comes from fossil-based resources.
- While several hydrogen hype waves have come and gone in years past, this current wave of interest is here to stay. Use-cases for hydrogen are much broader than those for transportation; the most apparent drivers today come from the need for low-carbon heat, with use-cases in chemicals and fuels to follow. Specifically, the U.S. is in a position to export hydrogen to Europe, which needs hydrogen but lacks space for renewable power production.