If you had asked a European citizen, or even a leader by the beginning of 2022, not many could have anticipated the challenges that lay ahead. The continent found itself grappling with a seemingly unimaginable question: How would they navigate the bitter cold of winter as their gas reservoirs began to empty? To compound the situation, the eruption of the Russia-Ukraine war further exacerbated the issue, leaving European countries heavily dependent on Russian gas.
This unprecedented energy crisis served as a stark wake-up call, emphasizing the critical importance of energy investments in securing a reliable and affordable energy supply. Global energy investments reached a staggering $500 billion in 2022, underscoring the continued significance of hydrocarbons in meeting future demand.
While the transition to renewable energy is an admirable goal, it has now become clear that a long-term vision cannot be achieved overnight. To ensure a stable and secure energy supply, investments in oil and gas exploration and development remain necessary. This approach paves the way for sustainable energy that is both reliable and affordable for all.
Oil and natural gas still necessary amid push toward renewable energy
Leading energy companies have recognized the need for a comprehensive strategy and have adjusted their approaches accordingly. Previously focused on “greening” their activities, companies such as BP and Shell have come to understand the importance of adopting a holistic approach. BP, for instance, initially announced significant reductions in hydrocarbon production, but it has since increased its investment in the sector by $1 billion per year. Similarly, Shell has redirected its focus towards natural gas, maintaining its global leadership in liquefied natural gas (LNG) while halting production cuts.
The International Energy Agency’s (IEA) World Energy Outlook Report for 2022 emphasizes the dire consequences of inadequate investment in the energy sector. Insufficient funding poses a significant risk of future hydrocarbon supply shortages, thereby jeopardizing stability and security. To meet climate goals and ensure a successful energy transition, investments on a scale comparable to those seen a decade ago – over $600 billion per year – are crucial.
As a Greek businessman who works both in Europe and the Mediterranean, I always look around for models that have worked well and those that have failed. Unlocking the energy potential of a state requires a collective effort and certain measures.
GOVERNMENTS PLAY a pivotal role in creating an environment conducive to energy investments. A striking example is Italy, which initially imposed a moratorium on exploration and exploitation but eventually recognized the importance of energy autonomy, adjusting its approach accordingly.
Some European governments, steadfast in their commitment to the fast transition paradigm, found themselves grappling with not only the challenge of funding electricity during a harsh winter, but also navigating complex geopolitical dynamics due to their heavy reliance on Russian gas.
Drawing inspiration from successful examples, we must acknowledge the remarkable achievements of Israel in embracing a diversified energy portfolio. Overcoming challenges, Israel reduced its reliance on coal and harnessed locally produced natural gas, achieving energy independence, lowering costs, and strengthening its geopolitical influence through natural gas exports.
Israel was also the country that provided a solid base for Energean to make its vision come true and lead the energy transition in the Eastern Mediterranean.
As we navigate the path ahead, it becomes increasingly evident that a holistic approach is essential to unlock a state’s energy potential. This transformation demands collective efforts and specific measures. Consensus-building, long-term rationale, and a shared vision at the governmental level are vital to ensure stability, security, and economic growth. Overcoming local interests and raising awareness of the long-term benefits within society are crucial aspects of this shift.
The world is currently grappling with pressing challenges in the energy landscape, necessitating a paradigm shift. No longer can we rely on the dichotomic approach of renewables OR oil and gas. Instead, a smart holistic approach is imperative, recognizing the interconnectedness of various energy sources. It is increasingly evident that a combination of renewables, oil and gas, nuclear energy, carbon storage, hydrogen, and other sustainable energy sources is necessary to meet the world’s energy needs. By embracing this paradigm shift, we can forge a path towards a sustainable and prosperous energy future, catalyzing stability, security, and economic growth.
The writer is the CEO of Energean.