Executive Q & A: How oil & gas companies can navigate the energy transition
Gas Processing & LNG (GP&LNG) had the opportunity to speak with Alexandra Gajewski (AG), Vice President, Energy Transition Solutions for Quorum Software, to discuss environmental, social and governance (ESG) and energy transition strategies.
GP&LNG: What consequences do oil and gas companies that fail to invest in a comprehensive ESG strategy face?
AG: Consumers and investors are increasingly demanding that the brands they support and invest in are sustainable. Climate change is one of the most pressing issues facing our society today, and it is crucial for companies to show they are a brand that cares. Companies that fail to act are prone to poor stakeholder confidence, struggles in securing financing and insurance, and a drop in valuation.
Finally, additional carbon pricing strategies and disclosure agreements may exist depending on where a company is located. While the U.S. federal government does not presently have these requirements, Europe’s carbon taxes and cap and trade on carbon emissions require companies in the region to prioritize a comprehensive ESG strategy or risk facing severe penalties.
Our organization firmly believes that emissions management is a non-negotiable part of doing business moving forward.
GP&LNG: What developments do you expect to see in the oil and gas industry in the next 5 yr that will affect how companies approach their energy transition?
AG: Many oil and gas companies have begun using cloud-based software to standardize their energy transition strategies. The technology has experienced solid adoption throughout the sector, but I expect the next 5 yr will see many more companies turning to the cloud to track emissions data and remove silos of information throughout the organization.
Although many regulations are already in place—from the Greenhouse Gas Protocol and other initiatives to ensure accurate emissions reporting, including the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB)—I expect to see much more regulation from the oil and gas industry at large in the next few years. This will likely further spur the energy transition movement.
GP&LNG: What steps should oil and gas companies take to begin their energy transition?
AG: Many companies make the mistake of using legacy processes to track emissions, such as manually consolidating data through emails, spreadsheets and even written logs. In addition to limited visibility and stale or inaccurate data throughout the organization, this approach makes it challenging to operationalize emissions reduction strategies.
O&G companies should leverage technology to gather, track and disseminate emissions data to improve transparency, auditability and governance to the overall strategy. To get started, there are four simple steps every organization should follow:
- Assemble an internal team: Dedicated energy transition teams can focus on managing constantly changing societal and government demands, determine what must be accomplished, at what pace to executive the transition, and more.
- Recognize the value in data and data governance: Organizations must identify a baseline for the transition by measuring existing assets and energy usage—data is key to this task.
- Create a plan to blend assets to fuel future investments: While moving to alternative sources of energy can be intimidating, the key is to blend existing assets with future, cleaner assets to help fund the energy transition long-term while making important strides in the near term.
- Find the right pace to transition: There are costs associated with transitioning too quickly or too slowly, and organizations must understand the right balance.
GP&LNG: What is the best way to approach management to incorporate new technologies as part of an organization's energy transition strategy? Where do we start?
AG: Securing buy-in from management can be a daunting task, but the key is to lead with data. Providing management with a thorough review of current emissions data and management systems, including any gaps that may exist, is crucial.
Organizations should begin by laying out the existing baseline of assets and energy usage, which will allow their teams to track successes, understand changes over time and forecast how successful future energy sources will be before solidifying a plan. Alert them of existing challenges in monitoring emissions, from siloes of information to legacy processes that are not handled to equip today’s fast-paced environment. From there, it is important to lay out the potential benefits of new technologies in terms of their business value. Will they bring in additional streams of revenue? Will they bring together multiple departments to improve the reliability of the data?
GP&LNG: What are some of the challenges companies face adapting to ever-changing regulations?
AG: Without a clear understanding of how environmental laws, credits and taxes are shaping up, it can be difficult to understand the full value of mitigating (for emissions) existing operations, transitioning to cleaner energy sources and finding the right balance between sustainability and financial demands. These competing priorities make it essential to tackle the challenges in tandem with the board, ensuring all stakeholders are aligned on the task at hand.
With evolving carbon pricing strategies come certain incentives and penalties associated with the energy transition, and companies can reap real benefits here. Having accurate data to identify these opportunities is key but comes with its own challenges, as well.
Companies often make the mistake of short-cutting their digital transformation by investing in new technology without really understanding the reasons or the data behind it. To mitigate this challenge, it is important to quantify carbon reduction goals up-front, review all the options and test them on a consistent basis.
GP&LNG: An ESG strategy emphasizes social responsibility. How can companies across the value change collaborate to achieve these goals?
AG: I do not think it is as much about collaboration as it is about being transparent in reporting and thinking through the implications of each project on prosperity (the financial bottom line), the planet and the people. The people aspect is multi-faceted—it is about the social impact the project has locally, but also its downstream impact.
What is exciting to me is that we are having more conversations about this and challenging the status quo. For example, carbon capture and sequestration can secure many new jobs to a workforce transitioning from traditional fossil fuel exploration and production. This can be favorable to a traditionally hydrocarbon-focused community while also providing environmental benefits. While utility-scale wind and solar are even cleaner operations, they may provide very few jobs to a community post-construction.
Interestingly, more than 20 yr ago, the UN created the United Nations Resource Management System (UNRMS) framework to provide a template for ensuring a balanced development of natural resources. Our organization is building a simple model in our portfolio tool based on this model to help countries and companies assess their energy initiatives from a portfolio perspective of people, planet and prosperity. GP
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Alexandra Gajewski is an experienced leader with a proven history of creating, delivering, supporting and managing energy software. During her two decades-long career at Quorum, she has led large software implementations, customer support and product teams, and driven the growth of many Quorum flagship products. As Senior Vice President, International Products and Energy Transition, she is responsible for setting the strategic direction of Quorum's Energy Transition Portfolio and educating the market on how Quorum’s existing solutions can solve key energy transition challenges.
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