Russia's invasion of Ukraine threatens global stability, energy security and independence, all of which occupy a prominent place on the U.S.'s net-zero agenda.
As a result, the oil and gas industry is receiving vociferous calls from various sectors to accelerate the energy transition away from fossil fuels and on to renewables.
Addressing the question of whether these events in Ukraine eclipse or reinforce energy transition, Mark Nelson, executive vice president, downstream and chemicals for Chevron Corp., pointed to factors that come into play, especially when discussing energy security.
"One, the importance of energy is being reinforced," he said. "The second thing might be that carbon reduction is the goal, not picking and choosing [different] types of energy sources. Quite frankly, everybody should be at the table to accomplish that over time. I think what we are seeing is that having more conversations today will help create solutions, rather than picking winners and losers."
Nelson said refiners are planning for marked change under the influence of these challenges as they consider the future.
"The refinery of today needs to become the energy hub of tomorrow. Think about where refineries are located today," Nelson said. "Refineries are located where there is infrastructure to get product out and infrastructure to get feedstocks in to meet customers' needs. Today, if you're producing more gasoline, diesel and jet fuel, tomorrow you'd expect to be producing some of those same things - sustainable aviation fuel that's renewable and perhaps something like advanced gasoline.
"But you could also have hydrogen - lower-carbon hydrogen - and you could even have [carbon capture, utilization and storage] at those same locations, because you have the best refineries in the world that are situated in locations where they are already connected to the market. You've got your customer needs and assets that can be turned into that over time."
Discussing downstream strategies at CERAWeek by S&P Global, Nelson remarked that both national and regional regulations will continue to influence the competitiveness of refining and international trade.
If legislators adopt an inclusive, "all-of-the-above" regulatory energy framework, "they'll likely get the best reaction from the market, and the most creative thinking will be unleashed," Nelson said, adding that this approach will yield "a better answer" for producers and customers alike.
Nelson similarly encouraged legislators to consider providing budgetary incentives in this regulatory framework.
"I do think that stimulus could get the journey started, but our responsibility [as industry leaders] is to build businesses that can last, regardless of what the regulatory or policy structure is," he said.
Regarding his outlook on whether the regulatory structure will move in that direction, Nelson said he "hopes for the best and prepares for the worst."
"In our portfolio, we want to design businesses that could withstand [regulatory restrictions] and be resilient in all environments," he said. "That's why, when we talk about the value chain, [it's vital to] make sure the investments we make are the most cost-competitive and capital-efficient."
The other war still rages
While observing that the challenges of the Ukraine are dominating contemporary conversation, Sazali Hamzah, executive vice president and CEO, downstream for PETRONAS, noted that the ongoing challenge of COVID-19 has spurred a change in human behavior that has impacted industry.
"People tried to adjust by putting in more time at home, and that changed the customer and the customer's requirements," Hamzah said, adding that he views this change as both "a threat and an opportunity.
"The threat was seeing mobility for our aviation requirements go down by 70 percent - we've seen all fuel prices go down. On the other side of the coin, we saw an increase in demand for PPE on the chemical side. We saw balance in those actions; the focus was different, so we adjusted accordingly. Of course, it's been tough, but that's the reality of our time."
