Jakarta. As the world was recovering from the Covid-19 pandemic, Russia launched a full-scale invasion of Ukraine.
As a result, we entered a new uncertainty marked by the rise in the price of oil. Followed by the increase in the price of other raw materials whose production depended directly or indirectly on the supply of oil.
The price of crude, which reached US$120 a barrel in early March, had fallen to US$86 a barrel. This was cheaper than when the Russian invasion began on February 24. However, the war between Russia and Ukraine, along with the looming global recession and other factors, have caused uncertainty in the oil and gas industry.
Amish Sabharwal, executive vice president of the engineering business at technology company AVEVA, said in a recent interview that the energy business was remarkably resilient. Having been in the energy business for nearly 25 years, he has admitted to witnessing many ups and downs in the energy industry. But according to Sabharwal, the world’s mistake was that we didn’t understand the long-term implications of oil and gas on the way we operate our world today.
“During Covid-19, the energy requirements were reduced, so we canceled energy projects. But that was a mistake because they reacted quickly to problems. And I think some countries, specifically North America and mainly Europe, reacted to things in the short term with energy,” Sabharwal said.
“And as a result of the conflict in Ukraine, Europe is the one that is hurt the most. But they have a lot of money. So, they can buy oil, and then second-tier or third-tier countries have trouble buying that oil because it goes to Europe first,” he added.
The high resilience of the industry has allowed numerous new projects with new ships built to transport oil and gas to be sanctioned around the world, according to Sabharwal.
“Our software helps them be more efficient to build these projects faster and, more importantly, sustainably. They are trying to build the ships with net zero carbon in mind to reduce the amount of carbon dioxide we generate,” he said.
AVEVA is a London-based industrial software company developing a digital twin to help customers develop resources, including oil and gas, chemicals, mining, food and beverage, or any industrial process, responsibly. AVEVA’s main customers come from energy producers around the world, from North America to Europe, as well as Asia Pacific. State oil company Pertamina is one of AVEVA’s clients.
Sabharwal said that the war between Russia and Ukraine has caused a short-term impact on oil supply and demand. But with the help of technology, the resilience of the industry could boost oil and gas supply in the medium term. And in the long run, Russia would lose its energy clout as countries can buy oil and gas elsewhere.
According to Sabharwal, collaboration is key to building a more resilient and flexible supply chain in times of crisis. and digitization is the solution to be more collaborative. Like Facebook or Google, the ability to communicate and share information is a strategy to improve the performance of the energy industry. Existing oil companies may not share your information today. But for the industry to become more resilient, they need to collaborate through technology.
Renewables play an important role but cannot replace oil and gas
Renewable energy could play an important role in coping with future rises in energy prices. However, it is unlikely to completely replace oil and gas, Sabharwal said.
“The reason is that everything we have today – plastic, phones, etc. – is made from oil. Renewable energy may change the way we drive cars or how we move around the world in terms of transportation, but it will never replace this material. So oil and gas will always have a place.”
The storage of renewable energy requires a strong investment and many infrastructures. As we transition, we still need oil and gas to build renewable energy storage infrastructure. Energy companies are also investing to become net zero emissions.
“I just had a meeting with the CEO of Pertamina. Five years ago, the conversation was about how to increase profitability. Today, the conversation was about how I reduce carbon emissions. How do I capture carbon? How do I store that carbon? How do I build a new facility that is net zero carbon? Sabharwal said.
“So while making money is important, every energy company in the world today is thinking about how to make energy sustainable.”
AVEVA develops software for engineers to “solve all these puzzles”.
“We have all the technology in the world to be net zero. We just need to apply it. We can capture carbon from oil and gas and store it. We can capture plastic instead of dumping it in the ocean.”
Digitization to help Indonesia’s energy transition
The global energy crisis has taken its toll on Indonesia. The country is now a net importer of oil and exporter of gas. The fuel price increase becomes inevitable because Indonesia is the second customer after Europe.
“The crisis is going to teach us, as in my message to young people, that oil and gas are not going to disappear. It’s there, and we shouldn’t try to kill off oil and gas because, thinking short term, we need oil and gas to make money to help us be more sustainable in the future,” Sabharwal said.
Sabharwal added that digitization could help Indonesia become more efficient in how it develops its resources and what matters. According to Sabharwal, AVEVA’s technologies can help Indonesia’s energy transition and goal of net zero emissions.
“In the operations with Pertamina, for example, we are building systems into their existing infrastructure to monitor carbon all the way from oil to gas to gasoline, to see how they can first see where the carbon is, and then track it. and then capture it. So we have two things: help our clients build net zero carbon facilities and help our clients reduce carbon emissions in operations,” he said.