THE OIL AND GAS INDUSTRY IN LATIN AMERICA TAKES THE CHALLENGE OF SEEKING SUSTAINABILITY WITH A STRONG SOCIAL AND ENVIRONMENTAL COMMITMENT
• Sustainability, human rights and the environment protection are no longer options but requirements to operate legitimately in the sector.
• Limiting global warming to levels ranging between 1.5 and 2°C will require substantial changes in the power system throughout the next 30 years.
• The companies in the region are working on transformation processes aligned with decarbonization and energy transition.
At present, the oil and gas sector challenges are not just in the exploration and production areas. Sustainability, transparency, energy transition and climate change mitigation are the factors that rule the industry management. This new reality and its impact were deeply analyzed by 13 CEOs during the closing day of ARPEL 2022 Conference, organized by the Regional Association of Oil, Gas and Renewable Energy Companies in Latin America and the Caribbean in the City of Lima, Peru.
Tis last day mainly focused on sustainability. Three specialist panels and a high-level panel, made up only of industry CEOs, brought the analysis to an audience of more than 600 senior executives, businessmen and industry representatives who participated in person in the sixth edition of the ARPEL Conference.
In short, sustainability, human rights and the environment protection are no longer an option for the industry but requirements to operate legitimately. This is what GeoPark Human Rights Specialist, María Elvira Calero, explained. “Today, we are speaking about licenses to operate, and this needs to be part of the industry and companies’ DNA”, said Pedro Mirás, President of the World Petroleum Council.
In this regard, “the commitment taken by the senior management of the companies is critical”, stated Mónica Tangarife, Ecopetrol Professional Senior Manager of Corporate Affairs. In response, the Executive Director of Centro Vincular, Dante Pesce, said that more diverse boards of directors are required for companies to have a 360° vision and identify where potential risks might come from.
"Sustainability is a living process not only within companies, it has to do with the survival of the sector," said Pluspetrol Corporate Social Responsibility Manager, Sandra Martinez.
ENERGY TRANSITION AND CLIMATE CHANGE
“Unless there is a fast reduction of CO2 emissions, the goals set to stop global warming will not be met”, said Thelma Krug, VP of the International Panel for Climate Change.
Thus, mitigating the climate change is another issue the industry needs to work on. The call for action is highly challenging, since preventing the global climate crisis from spreading –by preventing the thermometer from rising over 1.5-2 °C– will require material changes in the energy system during the next years. Krug empathized that unless we reduce the use of fossil fuels by 2030, it will be very difficult to restrain global warming.
“This is a global crisis, and therefore, we need to increase the pace and scale of the actions taken. In this sense, we need to fund developing countries”, said Sophie Depraz, Deputy Executive Director of IPIECA, at the panel regarding the role of the sector in the energy transition.
In the same vein, he CEO of National Energy Corporation of Trinidad and Tobago, Vernon Paltoo, pointed out that with decarbonization and energy efficiency, they seek to achieve sustainability for the industry.
Although there are several determining factors for accelerating the decarbonization of the region's energy systems, it is clear that the main one is to have solid regulatory and political frameworks in place.
In addition, one of the region's main challenges in terms of energy transitions is to achieve a fair and inclusive process, which at the same time reduces energy poverty and takes into consideration the context of each country.
THE INDUSTRY CEOS HAVE THE FLOOR
In this scenario, the big question is how companies are adjusting to this new reality. For this purpose, 13 CEOs participated in three different panels of ARPEL 2022 Conference and addressed the subject exhaustively for more than three hours.
Panel 1 focused on the experience of Peruvian companies. UNNA CEO, Reynaldo Llosa Martino, said that the companies in the sector are starting to redefine themselves as energy companies during this transformation process, to continue creating value and allocate financial flows to projects that are increasingly friendlier to the environment.
Andrés Mendizábal, CEO of COGA, indicated that reducing carbon emissions is a clear challenge to the sector. In this regard, he considered that a tax incentive scheme should be generated to promote the decarbonization process. Additionally, the executive said that company transformation also involves cybersecurity, given the huge risks of possible attacks and losses that might occur.
“We know that we have to reduce emissions and we are collaborating with the energy transition. The challenge is to continue working”, commented Maria Aybar, Perú LNG’s VP and General Manager.
In turn, TGP CEO Tomás Delgado explained that the industry continues to be the most reliable energy supplier in these times of energy transition.
Panel 2 involved a different dynamic, since its moderator, Pedro Mirás –President of the World Petroleum Council (WPC)– organized the discussion around specific topics: funding, talent retention, digitalization, communication and regulation. All these aspects are involved in the transformation companies need to go through at present.
The highlight was that ANCAP’s President Alejandro Stipanicic, Tecpetrol’s President of Exploration and Production Horacio Marin, OCP Ecuador CEO Jorge Vugdelija and National Energy of Trinidad and Tobago’s CEO Vernoon Palto agreed that the search for and retention of new talent is a challenge due to the expectations of the new generations and their understanding of a cleaner world. This requires companies to support new academic offerings aligned to a future with lower carbon emissions.
Moreover, the new generations have also become the focus of the communication content of companies in the sector, which means opening the range beyond traditional media to face communication actions through social networks. “The first thing we must acknowledge is that in 2022, communication is based on 280 instant characters and that misinformation must be confronted with data”, said Stipanicic.
Regarding digitalization, the panel members agreed that the COVID-19 pandemic accelerated the go-live times of technology innovations that helped remote operations with higher levels of security thanks to Artificial Intelligence. “Technology is critical to look at the future”, said Paltoo.
With regard to regulation, the executives argued that it should be stable, predictable and easy to understand, as well as a motivator for behavior.
Finally, Panel 3 –moderated by ARPEL’s Executive Secretary, Carlos Garibaldi, and formed by NGC’s CEO Mark Loquan, Heritage Petroleum’s CEO Arlene Chow and Staatsolie’s General Manager Annand Jagesar– focused on industry forecasts during the transition. Like on the previous panels, it was agreed that the oil and gas sector has the opportunity to continue its progress regarding decarbonization supporting a safe, reliable and environmentally friendlier energy provision.
ARPEL AND NATURGAS COOPERATION AGREEMENT
In order to promote integration and support for the energy sector sustainable development during a fair energy transition, ARPEL and the Colombian Natural Gas Association (NATURGAS) signed a memorandum of understanding that basically seeks to promote collaboration between both institutions as strategic partners for the development of the oil and gas industry and to position the energy sector as a key element of the energy transition.
Additionally, they seek to contribute to the positioning of natural gas as source of energy with increasing relevance and impact on the regional energy matrix, as well as to transfer experience, good practices, information and resources.
Naturgas is a private non-profit organization formed by the 28 natural gas producers, transporters, distributors and traders in Colombia. Its purpose is to promote the natural gas market development and streamlining in the coffee-growing country.
At the end of the day, the Chairman of the Board of Directors and the executive Secretary of ARPEL, Alejandro Stipanicic and Carlos Garibaldi, respectively, closed ARPEL 2022 Conference.
“The progress, results and future plans of the oil and gas industry in Brazil, Argentina, Colombia, Guyana and Suriname position Latin America as a potential key player in a global energy transformation marked by climate change mitigation and the need to meet the growing demand of accessible, safe and sustainable energy”, said Garibaldi in part of his event closing summary.
In turn, Stipanicic remarked that each region has a different consumption base, as well as different capacities and potentials, therefore resulting in more than one transition. Thus, ARPEL will prioritize the promotion of recovering the sector social license, which will involve communicating serious, sensible and independent information to generate a discussion about balanced energy. “ARPEL has the moral responsibility of leading this discussion. This will be our commitment from now on”, he said.
During the closing ceremony, it was announced that the seventh ARPEL Conference will take place in Cartagena de Indias, Colombia, in April 2024.