Bottom line, people can't ditch oil. Is going green doomed?

Hello and welcome back to today's episode of the Industry Forward podcast. We're talking about key trends and transformative technologies, all of the innovations in the world we live in that are reshaping everything from aerospace to automotive and our discussion today around energy. I'm your host, John Nixon. I'm the Global Vice President of Process Industries at Siemens Digital Industries Software.

Today, we're going to discuss how the whole energy sector is really moving towards that green future we've all been looking forward to. And I really do mean the entire energy sector. My guest today is Tiago Ribeiro. He's the Global Head of Energy, chemicals, and infrastructure, along with me at Siemens Digital Industry Software.

Tiago, I want to welcome you back to the podcast. Thank you, John. It's great to be here again. I want to kick off here with what is this elephant in the room, right?

There's a huge amount of buzz right now around oil. And the concern, do we have a limited amount of oil left in the world? and what's interesting is it's so important to our daily life, right? All the products that come out of crude oil.

What are your thoughts around worldwide when we think about oil reserves and we think about the importance of the oil-derived products? Right. I mean, when I think about it, honestly, I've been hearing that for a long, long time. When I started college over 20 years ago, people were discussing, well, will we have oil reserved for the next two decades?

And here we are. We do. And honestly, I do believe personally that we will have the oil and gas industry for quite a long time. But not as the same way that it's been working today.

But it will be there. I mean, oil is so pervasive in our lives that we take it for granted, honestly. I mean, every time you drive your car or take public transportation like a bus, or you take medicine, because these medicines that are saving humanity, a lot of the chemicals that are required to produce them, they come from the oil and gas industry. Or, for instance, when you eat a food, well, we do have the food industry because of oil and gas.

I mean, we need fertilizers to accommodate for all the demand for food. I mean, society is still growing, right? It's lower than before, but it's still growing. We need to produce more food.

And the only way of doing that is through fertilizers. And to produce fertilizers, we need urea to produce urea. We need ammonia to produce ammonia. We need hydrogen.

And to produce hydrogen, guess what? We need the steam reforming of natural gas. So oil and gas is so pervasive in our lives that I do not believe that we can simply turn it down. I mean, we use plastics in our daily life.

We are writing clothes that require oil and gas materials, dyes, and everything that is related to oil and gas. The $1 trillion question is, will it make sense for us to keep extracting oil the same way that we're doing today? Where is the market moving? Especially now that society is demanding greener technologies and decarbonation of operations.

That is where the uncertainty relies. And that is where I believe that digital technologies can help. You know, when you talk about this, there's an expression I like to use called health, wealth, and shelf a lot of times. the impact of crude products, for example, the plastics we see in med devices, for example, around health or pharmaceuticals.

When you think about what's on the shelf, you keep bringing us back to food, Chiago, when you talk about fertilizer and how it has a tremendous dependency on some root inputs for the production of fertilizer. So that's what gets food on the shelf. And when I think about GDP, the wealth of nations, it's often tied around, and in fact, it is in many ways defined by the availability of energy for that nation. So when we think about our dependency as a species on crude that still exists today and for the foreseeable future will be in place, how do we then become green?

How does the energy industry itself continue to become green? And then holistically as a species, how do we continue to drive this mindset of we are stewards of the environment, we are stewards of this little drop of water that is hurtling through the cosmos? You know, how will digital now support driving this green mindset when we think about where we start in the laboratory? You mentioned we've got to come up with, and I interpret and I infer from what you're discussing, we have to go all the way back to the lab, right, all the way back to the bench.

We got to think about better technologies around how we produce energy or how we extract crude and how we refine it and use it as that input to what we just discussed And then how do we then bring that to scale? So digitalization is going to play a very important role in, quote, going green, right? What are your thoughts around that? I agree with you, John.

And I think about three possible paths over here. The first is to be more efficient, specifically in oil and gas. Think about it. All of those oil and gas companies, when they're releasing their investors' reports, now most of them are also publishing data around emissions, CO2 per barrel, their efficiency of operations, of extraction.

this is becoming more and more important. Specifically for this part of society, I mean, the next generation, the Z generation, they are now entering the market and those guys are really, really concerned about environment, climate change. So those traditional energy companies, they are looking into that and they need to be more efficient in their operation. And right now, what we see is that due to silo data, a lot of the processes are inefficient.

If the processes are inefficient, what happens, the consequences, the natural consequences, we are using more resources than needed. Those resources can be oil, can be gas, can be water, which is a very important resource as well, and people often forget about it. And this has an impact in the environment. So one way for those traditional energy companies to go greener is to be more efficient.

And digital technologies can help in that way to design better equipment, to design better processes, and to monitor operations to find bottlenecks to reduce CO2 emissions. The second path is to deploy new technologies, right? For instance, returning to the example of fertilizers, we saw that in the end it's all about hydrogen, right? So one new way of producing hydrogen, it's not that new, but it's still catching up all around the world, is to produce green hydrogen.

And from green hydrogen, we produce green ammonia. Green hydrogen generally comes from the electrolysis of water. We split the molecule of water into hydrogen and oxygen, and we can use that hydrogen. If the electricity needed for that process comes from renewables, it can be a wind tower, it can be solar panels.

In the future, it could be even nuclear, right? We can use that cleaner hydrogen to produce a cleaner form of fertilizers. that in the end will impact the society. And of course, the third path is the synergies among those two.

If people think about two independent industries, for me, it's an entire energy industry, right? We see that oil and gas companies, because they have been around for quite a while, they have deep pockets, they're now hedging their risks. They're also investing in these new technologies, putting money in renewables, putting money in nuclear. And the nuclear industry and the renewable industry can take advantage of the supply chain that these traditional energy companies have built for decades.

And that can ramp up manufacturing, production, and deployment of these new technologies. So this synergy, for me, it's quite important. And this is going to be the future of energy over the next five to ten years. Let me pick up on that comment you just made around oil and gas companies and how we're really seeing them identify themselves as energy companies.

So there's a shift really happening in the complexion of energy providers, right? Oil and gas exploration companies really see themselves as providers of energies. of energy. How does this relate then to digitalization in the greener future?

What you're telling me is really the way in which oil and gas companies picture themselves is no longer oil and gas. They really are energy companies, and we're finding they're into other forms of energy now. You are completely right. And let's use an example from a different industry, right?

Or a correlated industry here. So automotive industry. So for decades, we call this industry automotive. But in the end, it's about mobility.

Because the end user, like myself, we have options. I can drive my car. I can drive around the city using my electrical bike. I can take the subway.

I can take a plane, depending on where I'm going. So there are options. So wouldn't it be more interesting to call this ecosystem the mobility ecosystem? Because I do have all these options available at my disposal.

For energy, it's quite the same. I mean, we have a huge dependency in oil and gas. It's very important. Nobody expects us to turn it down from night to day.

But we have options right now that we didn't have like 20 years ago when I was starting college. We do have wind, we do have solar, now we have small modular reactors, we will have soon fusion energy, we have geothermal. So does it make more sense to call it the energy ecosystem Because in the end we need to think about the value that it brings to the end user And those traditional energy companies oil and gas companies they are rebranding themselves They started the process 10, 15 years ago.

We see a lot of the names of those big owner operators. They changed throughout the decades because those companies are hedging and they are diversifying their operations. And digitalization plays a key role, of course, because in the end, if I need to provide energy to my end user, how do I do that? How do I do that in an efficient way, in an economical way?

I mean, I have visited recently a major energy company, and they have everything in their portfolio, from hydroelectric companies to solar to wind. But again, they need to do all of those advanced real-time monitoring and decisions to make sure that they are using the right part of their portfolio in the right moment. So they're economically feasible and they are deploying it on the right time. And what I'm trying to say over here is that this increasing portfolio can only be managed efficiently through digital technologies.

So the decision maker needs to be sure that there are good processes and good automation in place. So they will achieve their targets of decarbonization, but also achieve their economic targets because those two needs to work hand in hand. You cannot think about deploying a low CO2 technology if it doesn't make any sense in terms of economics, right? So it's about molecule to money.

And I know this is a metaphor that you like to use a lot, right, John? Well, what I think of is, for example, we're going to see the changing face of energy, right? As you're talking, what I'm understanding is oil and gas will play a role in our future, but it'll be a different role. We're going to see what people commonly call green tech, right?

Your fusion, your advanced nuclear, your renewables like solar and wind, geothermal. When you look at those technologies displacing what we use, in my view, inefficiently around power generation with natural gas and the full gamut of hydrocarbons, when I look at that and I think about the changing face of that, I also start to think about how digital in like kind has this rather parallel path. We're going to see how digitalization, and in fact, when I came here 10 years ago at Siemens back in 2016, I would say the energy industry was just really beginning its digital transformation.

And I'm talking all of energy, right? Oil and gas, renewables, the whole gambit. And it's been an accelerated pace over the last decade compared to, say, the 20 to 25 years prior to that when I worked in the industry where everything seemed to be the same year after year in how we manage data very inefficiently. And so just as we're seeing transformation of energy, we see the parallel path of the transformation of digital that has to go hand in glove with that.

And I'm excited to see how we've been able, just as you indicated, oil and gas will derive lessons from renewables and green sources of energy. I also see in the digital space, we've got lessons from aerospace and automotive, for example. So when I joined Chiago 10 years ago, of course, product lifecycle management, which had been in place for the wheels and wings of the world, right? Those manufacturing, those discrete manufacturing segments, marine, automotive, aerospace, industrial machinery, heavy equipment.

And I looked at product lifecycle management, and I thought, well, here are lessons that are held for us to bring over into energy. Just as green energy holds lessons for legacy oil and gas, so I see discrete industries have a legacy that hold lessons for us here in, we'll call it the process industries, specifically what we're talking today, which is about energy and chemicals. Could you just take a moment, kind of share with me, when I start to discuss that, what are some of the technologies that you're seeing from Siemens that are transforming energy that we've been able to bring out of discrete industries?

Right. How much time do we have? Like three to four hours? Well, we've got future episodes where we can talk about that.

But I'll tell you what, let's zero in on one specific one. So product lifecycle management, right? Product lifecycle management for the production of discrete equipment, for me, holds lessons for what we're seeing now in green tech, solar power, fusion, advanced nuclear, where they face the same kind of fabrication challenges on the factory floor before they send it out for receipt in the field Right So again let me take a step back Right So honestly we could start from a laboratory bench if we want to like you mentioned before.

So, now we are thinking about society is looking for new ways of decarbonizing aviation. And one of the ways to do that is to think about new molecules, greener molecules that we can use to decarbonize aviation transportation. I mean, I'm a proud Brazilian, you know. And we've done that here in Brazil for the mobility industry.

More than 25% of our gasoline has ethanol because it improves the octane rating but also reduces CO2 emission. We've done that with diesel. We basically put biodiesel mixed with diesel to decarbonize our operations. And we are also thinking about decarbonizing aviation, not just Brazil, but many countries, including the U.

S., looking for new molecules. Now, how do we do that efficiently on a laboratory bench? And let's assume that you have a few options of molecules and chemistry there that could help in this task.

You need to scale this up, right? You need to go from a bench to an industrial scale. So you gain this efficiency in producing large volumes. Then you need to think about equipments, right?

And you need to think about EPC companies that are going to install these equipments for you. And then you have to run this whole process, real-time monitoring, automation, and you have to anticipate problems that might happen. And this is just one sub-industry. This is just oil and gas.

Now we need to think about the interaction with suppliers, with agriculture, to get those green molecules. We need to think about other technologies such as wind, such as solar, in the future, nuclear. And not just in the future. When I was attending the second Advanced Nuclear and Fusion Energy Summit in Washington, D.

C. a couple of weeks ago, What I realized is that the chemical industry is already working together with the nuclear industry. There is a large chemical unit plant in the United States. They basically signed a project to have a nuclear reactor installed in their operations to produce high-quality steam, to decarbonize their operations.

So you see, there is a lot of moving parts and a lot of data flowing from OEMs, EPCs, honor operators, startups, incumbents. We need to manage that and create this comprehensive digital twin to make sure that those mega structures and mega projects are actually delivered in time and a reasonable cost. You know this, John, more than I do, that a lot of those greenfield and brownfield projects, they are being delayed. They are costing much more than anticipated because data is siloed.

So the way of solving this problem is create a comprehensive digital twin where all the data is federated into a single place and that allows collaboration from multiple disciplines in a single environment, creating this single source of truth that will enable companies to be more efficient. Well, thank you for that, Tiago. I mean, just so much to take in, so much to consider. And let me just recap what we've talked about today because we're running short on time, but I want to come back to a lot of what you've just discussed in our future episodes.

You know, we realize that for our species, oil and gas is going to be part of our future. But to your earlier point, its use, its extraction, its refinement, and its ultimate end uses should and will be very different. And that's going to require us to address efficiencies. And I like your point earlier about synergies, the mix of that energy, how we can actually find ourselves using green energy in the extraction and refinement of, let's say, oil and gas to, again, lower its very footprint and impact on the environment.

And I like your discussion here around Siemens, the digital solutions we have. As you're talking, again, I'm thinking about we have many lessons from other industries that we can glean and use and apply to drive the very efficiencies and synergies you're discussing we need for the future of oil and gas. So I want to thank you, Tiago, for joining me. As always, I really enjoy working with you, having these conversations, and it is so exciting to welcome you, the listener, into these conversations.

And we welcome your comments and your thoughts as you're listening to this to reach out to us, and let's have a broader conversation as we go forward. So I hope that this has helped our listeners with their processes in the process industries, always remaining puntastic here on our podcast. and I want to thank everyone for joining us and I welcome you in joining us for future episodes. Tiago, have a wonderful day.

Thank you, John. This has been great. I'm really energized and yes, pun intended.