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* Petronas re-thinks portfolio after "great reset"
* Shell still sees "huge future" in hydrocarbons
* Vitol calls on energy industry to invest more in CCS
* Carbon pricing key for CCS to take off - Citi
By Florence Tan and Chen Aizhu
SINGAPORE, Sept 15 (Reuters) - The economic trauma caused by
the coronavirus pandemic has pushed energy companies to step-up
investment in renewables, hydrogen and other low carbon
alternatives, but fossil fuels will be their dominant business
for the foreseeable future, industry executives said.
Reeling from the onset of the pandemic, global oil
consumption shrank by more than 20% in the second quarter and
prices hit their lowest in decades, making companies rethink how
fast they should make the transition away from reliance on oil
and gas.
"Everyone's talking about this great reset ... What do we
need to do to survive this?" Arif Mahmood, Petronas' executive
vice president and CEO of downstream, said at the virtual Platts
APPEC 2020.
"Energy transition will be pushed forward much faster," he
concluded.
The Malaysian state energy company posted a $5 billion loss
in April-June and has set up a team to reshape its portfolio and
expand in solar and wind for power generation.
Malaysia is the world's fourth largest exporter of liquefied
natural gas, and Petronas would maintain its "gas agenda", Arif
said, noting that the company was about to begin operations at a
second floating LNG plant in Malaysia, and it was also working
on an LNG joint venture in Canada.
Oil majors such as BP have set ambitious targets
while Chinese state energy companies tiptoed into renewables as
they continue to prioritize hydrocarbons for China's energy
security needs.
Besides expanding into solar and wind for power generation,
more energy companies are researching blue hydrogen produced
from natural gas and using carbon capture and storage (CCS) to
reduce emissions in the process. The hydrogen could be used in
power plants and fuel cell vehicles.
Royal Dutch Shell is involved in biomethane,
biofuels and hydrogen and has done "significant work" on CCS as
the energy major strikes a balance between energy transition and
its core hydrocarbons business, Mark Quartermain, Shell's vice
president of crude trading & supply, told the conference.
"We've got to make sure we don't ignore the fact that oil
and gas are going to remain essential fossil fuels," Quartmain
said, before adding that going forward there will greater focus
on climate change and energy transition.
"When it comes to energy transition we need to be in these
markets," Quartermain said.
Heads of research at commodity trader Vitol and Citigroup
expect CCS to be the next key area of development.
"Hydrogen and carbon capture are more likely in short term
to be contributing to decarbonization," Giovanni Serio, Vitol's
global head of research, said, calling on the industry to invest
more in CCS.
"Some countries are finding ways through credit systems and
other mechanisms to price carbons...It's what's really needed
for carbon capture to take off," Ed Morse, managing director and
global head of commodities research at Citigroup said.
However, "the cost structure of hydrogen is just not
competitive enough...it's there but it could be end of the
decade phenomenon," Morse said.
In the refining and petrochemical sectors, companies are
exploring biofuels, producing chemicals for products that are
more widely used in the pandemic such as gloves and for
recyclable materials, industry executives said at APPEC.
(Reporting by Florence Tan, Chen Aizhu and Koustav Samanta;
Editing by Simon Cameron-Moore)
