Oil & gas logistics and transportation in the region can reap substantial benefits while using green technologies
The region’s oil and gas companies are increasingly factoring the energy transition into their plans for growth and development. Major national oil companies have invested into green technologies like solar, hydrogen, and carbon capture, among others, and international oil companies and suppliers are making commitments to net zero emissions targets. Still, there is much yet to be done, and we are still at the beginnings of the path towards the energy transition.
“It is not just a smart move environmentally, it is now a business decision,” says Raji Hattar, Chief Sustainability Officer at Aramex. Indeed, becoming a part of the energy transition is no longer an option, but a reality, and analysts and energy institutes are increasingly pushing oil and gas companies to help facilitate the transition.
Transportation and logistics must also adapt to the energy transition. While this is already happening to a certain extent, it must be accelerated. Heavy-duty transportation accounted for more than 4 gigatons of carbon dioxide emissions in 2019, according to a July 2020 report by Boston Consulting Group (BCG). For this segment, the energy transition has many forms; from solar-powered warehouses to electric vehicles and environmentally friendly packaging.
Executives in this sector must seek out the opportunities that the energy transition presents, rather than viewing it as a compliance burden. Climate action is not only important to make transportation and logistics more resilient in a changing energy landscape, but also has the potential to “create tangible value by tapping into new markets and meeting new types of demand for low-carbon services,” BCG writes.
Solar roofs are a clear area of opportunity in logistics, since warehouses typically have big rooftops that can be utilised. The Dubai Electricity and Water Authority says that most solar panels have a life cycle of up to 25 years (or longer, if well-maintained), and the average return on investment for solar projects can be anywhere from four to seven years in Dubai.
Essentially, that means that a company’s investment is paid back in up to seven years, and then after that, benefits from about 20 years of free energy and electricity production. Not only is this environmentally friendly, but it can help companies cut costs.
The region is generally favourable for solar initiatives, since the GCC tends to receive sun almost year-round. Solar also pairs extremely well with fleet electrification, since vehicles could be charged with electricity generated from renewable resources, further decreasing the company’s carbon footprint.
“An electric van can save between $3,000 to $5,000 per year, because it cuts fuel costs, spare parts and downtime, since they don’t require frequent maintenance,” Hattar says, noting that fleet electrification is an essential component of the energy transition for the sector.
Hydrogen-fuelled vehicles could also be a viable alternative, as GCC governments have invested heavily into the technology and already have much of the infrastructure needed to develop hydrogen products. However, this is an emerging fuel and would require further research and testing to be implemented across the region.
There are emission reduction measures that are easier to implement, Hattar notes, including automating processes, reducing paper consumption, replacing plastic packaging with biodegradable and compostable alternatives to cut down potential pollution, and investing in energy efficiency across operations.
Seemingly simple changes like shifting lighting fixtures or upgrading chillers can boost energy efficiency and reduce consumption without involving a single, large investment into new assets.
Still, challenges persist across the segment’s energy transition.
“The major obstacles are the availability of technology and willingness of manufacturers to come to these regions, as well as legislation,” Hattar says. “There is a misperception from some suppliers that oil-producing countries won’t consider green solutions, like electric vans and vehicles.”
Equally, while oil and gas companies are investing in renewable projects like hydrogen production plants and solar farms, they aren’t necessarily prioritising the impact of green technologies on their logistics and transportation operations.
Hattar calls this an awareness issue, which can be remedied as green technologies mature and spread in the region. With the large-scale renewable investments and mega-projects already underway in the GCC, and government initiatives to slash emissions, that seems only to be a matter of time.