Beware OPEC member states! Use of fossil fuels threatened

Most OPEC member states have annual budgets that are still based on revenues from crude oil exports. The evolution of the global energy sector provides opportunities as well as challenges for countries whose economies are largely dependent on fossil fuels revenue. Monoproduct economies are exposed to the fluctuations in the prices of these fuels in the international market.

For decades, fossil fuels have accounted for a larger proportion of global energy supply sources. However, with increasing environmental challenges, arising from increasing concentration of greenhouse gases (GHG) associated with fossil fuels combustion, there has been a renewed emphasis on low carbon intensive and environmentally friendly energy sources.

Consequently, several technologies are being developed for the production of renewable energy resources as well as natural gas, which are considered low carbon emitting sources. These technologies are also becoming economically competitive with conventional energy sources.

Moreover, major energy consuming economies, which are major markets for petroleum products (China, India, Europe, etc) are realigning their energy policies and economic dynamics in favor of low carbon-intensive sources.

This article provides an insight into the technologically driven changes in the global transport landscape, and the inherent challenges and opportunities for petroleum developing economies.

Challenges for OPEC member states

Electric vehicles (EVs)

There are projections that EVs will account for almost 55% of all new car sales and about 33% of the total fleet. In addition, the cost of EVs is expected to become competitive without subsidy by 2024.

Furthermore, with the rapid growth of EVs, it is expected that by 2040, over 7.3million barrels per day of transportation fuel will be displaced. China is set to become the largest market for EV up to 2040. India is already targeting complete electrification of its vehicular fleet by 2030. European and American markets are following suit.

The affordability and widespread use of electric vehicles is being driven partly by falling battery costs. The electric car boom could cut projected oil demand from vehicles from almost 25m barrels of oil per day to 15m barrels.

The BP chief economist, Spencer Dale argued that a quicker than expected uptake of new, energy-efficient technologies due to government support could spur an even greater shift away from oil use.

Hybrid vehicles

Hybrid vehicles (HVs) are those automobiles that use two or more engines (that is, a conventional engine – either diesel or petrol; and an electric motor). HVs are becoming more popular because of their energy conservation and low carbon emission characteristics.

The environmental friendliness, less fossil fuel consumption, and energy conservation of HVs makes them very attractive. Thus, many governments, especially in Europe, provide incentives to support the purchase and use of HVs for public transportation.

What is critical about the development of EVs and HVs is that, governments in advanced and emerging economies are planning to ban the sale of petrol and diesel powered vehicles. In addition, the price of batteries for these vehicles is falling rapidly, thus making these vehicles more affordable to consumers and more profitable for manufacturers.

Hydrogen energy world

Hydrogen and fuel cells have been recognized as an emerging technology option for transitioning in the long term to a cleaner energy system; with the considerable longterm potential to displace fossil fuels and thus reduce the carbon emissions from the transport sector.

Technologies for producing hydrogen from water and renewable energy resources are at various stages of development. In this recognition, several countries are already pursuing strategies for achieving hydrogen-based economy.

The EU targets a de-carbonized energy system by introducing hydrogen energy in both aviation and road transportation by 2050. In the US, a coalition of US fuel cell stakeholders recently called for a ten-year US Federal Government programme to implement and deploy hydrogen and fuel cell technologies.

Japan is also aggressively pursuing research and development of hydrogen and fuel cells technologies; with plans to commercialization nearly 50, 000 fuel cell vehicles and installation of about 10,000 MW of stationary fuel cell capacity.

There are also growing international partnerships with many countries and incentives to a move to the hydrogen economy. With the development of technologies that can convert hydrogen to electricity for vehicular and stationary applications, the end to the fossil energy age may be imminent.

New opportunities for OPEC member states

Mini-LNG

These are small-scale LNG facilities with capacity to process less than 0.2 Mtpa (million tons per annum) of LNG, equivalent to the annual LNG demand for a 100MW power plant. Globally, there is an increasing demand for Mini-LNG as fuel for the transportation sector.

This development is as a result of the rising cost of fossil fuels and environmental concerns. In the nearest future, Mini-LNG could enable the establishment of power plants and industries like fertilizers, petrochemicals, ammonia, urea, food, pharmaceuticals, ceramics, etc. in areas with gas infrastructure deficiency.

Mini-GTL

There have been significant improvements in the development of small Gas-To-Liquid (GTL) plants. This push is further complemented by the Zero Routine Gas Flaring Initiative made at the COP-21 in Paris. The Mini-GTL technology will be important for meeting the gas flare reduction target by 2030.

There are various commercial scale Mini-GTL projects at different stages of completion in the US, Middle East and Central Asian countries, which is capable of capturing stranded gas or flared gas at different production well sites.