Abating carbon footprint in an energy hungry region
Article by Davide TramballiInstitutional Support for Business Development MENA & APAC, Public Affairs, Eni
In the wake of the COP-26, net zero targets are spreading all over Asia. As China, India and Indonesia have released their own pledges, more than 4 billion people, roughly 60% of the world’s population, now live in countries that declared ambitious zero-net goals. This is having crucial implications on energy markets and their future development. Firstly, ‘net zero’ is becoming a priority for developing nations; this is not an exclusive feature of OECD countries anymore. Secondly, larger Asian nations are increasing pressure on relatively ‘smaller’ nations in the region to do significantly more and better. Thirdly, net zero targets are becoming an economic necessity for APAC countries, as they carry the biggest energy deficit of all World’s regions, compounded by the need for immediate pollution relief shared by virtually all major Asian cities. Finally, Asian countries (especially in the continent’s South-East) are increasingly using next zero pledges as a formidable tool to attract investments, which are and will be more and more pivotal in allowing Asian nations to increase their renewables’ generation capacity.
Overall, especially in Asia-Pacific, net zero targets are balanced by the serious energy needs of its fast-growing economies and populations, that have turned the region into the World’s largest emitter of CO2 (with roughly half of all global climate changing gases) and are expected to drive 60% of the total global energy demand growth between now and 2040. The top three contributing factors to CO2 emissions are electricity and heat production, manufacturing, and transportation, largely as a result of increasing urbanization in Asia. Especially China and South-east Asia display the World’s fastest growing energy demand, which since the early 2000s has been covered for more than 90% by fossil fuels. To allow Asian countries to achieve the required level of growth, fossil fuels are set to remain a mainstay of supply over the next decades. According to the 6th Asean Energy Outlook’s target scenario, released in Nov. 2020 and to be reviewed in light of 2021 developments (including the results of COP26), the coal-fired power generation capacity is set to increase from 103 gigawatts (GW) in 2020 to 207 GW in 20401.
Looking at these trends, the technologies and know-how Eni has developed on its innovation itinerary are clearly emerging as an effective answer to the Asia Pacific energy transition needs. Firstly, as regional countries start to gradually phase out coal in their energy mix, in line with one of the main COP26 priorities, LNG-to-power projects have mushroomed across the region, fostering gas demand from the power sector. Eni aims to increase local production of natural gas in this area and to market growing volumes of liquefied natural gas (LNG) replacing coal. This will be crucial to reduce APAC’s countries’ emissions while allowing them to also meet their burgeoning energy demand2. Parallelly, Eni intends to leverage on its expertise in renewable energy sources such as solar and wind, at the center of the company’s strategy with a planned increase of 60GW in its global installed capacity by 2050, to support APAC countries ambitious electrification’s targets. Electrification is also crucial to make mobility increasingly sustainable, but not sufficient or fast enough to decarbonize the transport sector. In this regard, Eni’s leadership in the production and marketing of advanced biofuels represent an immediate and complementary solution, also promoting circular economy projects based on the reuse of food and agricultural wastes through environmentally sustainable supply chains. Eni Biojet fuel, which contains 100% biogenic components and could be combined with conventional fuel up to a 50% mix, will especially play a great role in tapping the demand of sustainable aviation fuels (SAF) from the fast-growing regional aviation markets. Carbon dioxide Capture, Utilization and Storage (better known by the acronym CCUS) could be another key tool for the decarbonization of regional energy systems and a first enabler of the hydrogen economy by unlocking the production of low-carbon hydrogen at affordable costs in the near term.
Most relevant Countries of Eni presence in the Asia Pacific
Eni is present in thirteen Asian countries with activities covering the whole energy value chain. In line with the company’s strategy, operations are progressively combining traditional oil&gas projects with energy transition initiatives also in Asia – in view of the total decarbonization of Eni’s products and processes by 2050. This is shown by the efforts Eni is carrying out in some of the most important regional countries.
Indonesia is one of APAC’s ‘giants’, and its recent net zero 2060 target has been a breakthrough in the region. However, this clashes with Indonesia’s major coal production and exports (especially to China), and with the planned addition of 33,000 MW to the country’s electricity production, whose probable cancellation opens up a significant window of opportunity for natural gas developments, coupled with CCUS decarbonization’s technologies. Eni is well positioned to effectively contribute to these targets, as it already owns a total of 12 exploratory and producing natural gas blocks. The company produces gas from the Jangkrik field since 2017 and from the Merakes field since April 2021, supplying the Indonesian domestic market and Eni’s own LNG portfolio: the majority of the gas is liquefied at the Botang plant and sold to Pertamina with long-term contracts, decisively supporting Indonesia’s development and ambitious coal phase out objectives. In recent years, Eni and Pertamina have also explored new opportunities for cooperation in biorefinery, circular economy, low-carbon products, waste management, biomasses and R&D.
Vietnam is another key country in Eni’s Asian strategy. The company made a significant gas and condensate discovery in the country’s offshore in 2019, untapping resources that will potentially play a crucial role in reducing the country’s coal dependency, increasingly at odds with its net zero 2050 pledge, while ensuring its growing power demand. In addition, the company has discussed new potential developments in the fields of renewables, biofuels supply chain, and other environmental projects.
Australia represents another example of the integration of gas production with decarbonization processes and renewables. Eni has operated in the country’s North-west offshore since the early 2000s, with activities centered on the exploration and production of natural gas. In 2019-2020 Eni acquired three photovoltaic plants with a total capacity of almost 60 MW in the Northern Territory, which represent its entry into the Australian market for renewables. In addition, in May 2021, the company signed a MoU with Santos to improve cooperation in the development of a CO2 capture and storage/utilization facilities (CCUS) in the Darwin area, serving not only assets owned by the two companies but open to any interested third-party project, with the long term objective of facilitating the creation of a CO₂ management hub in Australia’s Northern Territory.
As the World single largest greenhouse gas emitter, China’s energy plans and net zero targets remain pivotal for the success of the global decarbonization and energy transition processes. The pledges made by President Xi and enshrined in the 14th Five Year Plan (2021-2025) are ambitious3, and shall be reconciled with the huge energy needs of its dynamic economy, and with the country’s over-reliance on coal - especially in the industrial sector, where giant state owned enterprises (such as China Energy Investment Corporation, the world’s largest coal producer and coal-fired power generator) account for roughly 65% of China’s total carbon emissions. The need to drastically cut its coal-powered generation and thus increase reliance on renewables and natural gas opens up several opportunities in China’s rapidly evolving energy sector. Eni has been strengthening its position there since 1984 and today has an integrated presence in oil&gas exploration and production, supply of LNG, refining technologies and trading of crude oil and chemicals. In December 2020, the company signed with the International Cooperation Center of the National Development and Reform Commission (ICC-NDRC) an agreement to promote the collaboration in energy transition, focusing on low-carbon energy sources, advanced technologies and circular economy initiatives.
The 21st Century has been marked by many experts as the “Asian Century”, and the way APAC’s countries will address their energy challenges will be decisive for the global energy transition. With this in mind, over the last years Eni has been building up its integrated presence at the heart of this key energy region, with a strong commitment to diversify energy sources and support economic growth. Looking ahead, the company is seeking to further strengthen its presence, capitalizing on proprietary technologies and decarbonizing solutions to help Asia-Pacific countries on their path towards a safer and sustainable energy for all.
1 The 6th Outlook, published in November 2020, was supplemented in 2021 by the ASEAN Plan of Action for Energy Cooperation, Phase II 2021-2025, stating that: "Taking into account the COVID-19 pandemic, ACE projections indicate that total regional primary energy supply (TPES) could decline slightly by 3% in 2040 in the same reference scenario" (p.1)
2 Develoments in Asia Downstream LNG, Wood Mackenzie, Dec.2021
3 Peak CO2 emissions before 2030; carbon neutrality before 2060; https://racetozero.unfccc.int/chinas-net-zero-future/