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Energy Transition Now - Episode 25 with Lola Caballero Laporta

The oil and gas supply chain plays a key role in producers achieving both efficient operations and their net zero targets. David – and co-host Teresa Wilkie – spoke with Lola Caballero, Head of the Decarbonisation Task Force at Maersk Drilling to understand the opportunities and challenges faced by drillers – and Maersk specifically – as the industry transitions.

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About Lola

Lola Caballero Laporta

Lola Caballero joined Maersk Drilling in 2017 and has since held several commercial and strategy positions within Business Development, Bidding and Partnerships.

In 2021 she took over the newly created role of Head of Decarbonisation Task Force responsible for realising Maersk Drilling’s GHG emissions reduction ambitions.

She graduated in International Business, and before joining Maersk Drilling Lola worked in A.P. Møller-Maersk and ASAP Worldwide within Project Management and Business Development.

David Linden [00:00:00] Hello, everyone. I’m your host, David Linden, the Head of Energy Transition for the Westwood Global Energy Group. And you’re listening to Energy Transition now. On today’s episode, I have my wonderful colleague, Teresa Wilkie, Research Director for our RigLogix solution, joining me from our Aberdeen office. Hello, Teresa.

Teresa Wilkie [00:00:19] Hi, David. Thanks for having me.

David Linden [00:00:22] Absolute pleasure. Always nice to have some additional company on this one. So, net zero targets, at least for scope one and two, if not three, are now a core part of oil and gas producer strategies. But what happens if your business is in providing services needed, for example, to drill for those hydrocarbons, which is the bedrock of the oil and gas producers in the first place? You know, you are the supply chain essentially making it all happen. How should you react in this fast changing world? Lots of big questions. And to give us her perspective, I have a real pleasure of welcoming Lola Caballero Head of the decarbonization task force at Maersk Drilling here with me and Teresa today. Welcome, Lola.

Lola Caballero Laporta [00:01:14] Thank you, David. And hi to you and hi Teresa. It’s a pleasure being here today.

David Linden [00:01:19] Wonderful. Thank you. It’s always great when people find the time. I know it’s holiday season coming up and everyone’s keen to get away, so hopefully people can listen to this on their sun loungers as well afterwards. Right. Okay. Well, let’s get cracking with the question. We have quite a few to run through today, actually. There’s a lot of good stuff going on, but not everyone that’s listening because you have quite a broad audience is always familiar with what the different companies are, what you do, etc.. So let’s start off with some of that kind of that basic, some of the 101. And let’s start with the most obvious one then. Can you just give us a bit of background as to who Maersk Drilling is, please?

Lola Caballero Laporta [00:02:02] Sure. So Maersk Drilling we are an offshore drilling contractor. And this basically means that we provide offshore drilling services to energy companies with operations worldwide. And we have been actually doing that for the last 50 years. We are currently celebrating a 52 year anniversary, which is also great. Thank you. So, yeah, we have a fleet of 18 drilling rigs combining both floaters and as well as jackups and four floaters. We have both drillships and semi-submersible as well as then jackups for harsh environment and then ultra harsh environment. Seventies are the most advanced jackups. And yeah, I would say that, you know, we have a lot of experience from exploration to development and P&As and as well as subsea and HPHT wells. And we have a big presence both in the North Sea as well as an extensive experience in the Deepwater segment where we actually hold the record for the drilling in some of the deepest water depths. So this is Maersk Drilling in a nutshell.

David Linden [00:03:08] Perfect. Thank you. And you’re headquartered in Denmark, is that right?

Lola Caballero Laporta [00:03:11] Yes, yeah. We’re headquartered here in Copenhagen.

David Linden [00:03:14] Wonderful. Okay. Very interesting indeed. And then? And then what about yourself, Lola? So I don’t always normally go through people’s biographies in great detail. We’ll have them on our website so people can always look and get a bit of detail. But obviously, you have quite a specific role that I mentioned earlier. Could you maybe just explain a little bit about yourself and how you well, how you got to be in the role that you are you are in now, essentially?

Lola Caballero Laporta [00:03:42] Yes. So I actually I work precisely with the decarbonization in Maersk Drilling and working every day towards meeting the reduction targets and supporting the company to, you know, support the world to limit global warming to hopefully below 1.5 degrees and avoid a catastrophic and irreversible impact in the climate. So I actually spent five years in Maersk Drilling where I started in the commercial department. And before that I was working in the Maersk group as well, but more in the transport and logistics segment. So I got through commercial and then I started working in decarbonisation because I thought it was a really important subject to be working in these days. Very interesting indeed.

David Linden [00:04:31] Absolutely. So just as a side question to that, has decarbonization as the taskforce that you’re sort of leading now, has that always existed, for the last decades? Or is this a relatively new and relatively new thing?

Lola Caballero Laporta [00:04:45] It’s actually it’s relatively new. We started the taskforce in December 2020, and that is because as part of the sustainability strategy that was launched in 2020, one of the key pillars of that sustainability strategy was the sustainable energy future. And as part of that, we made a target. We set up a target of reducing our emissions by 50% by 2030. And to do that, we decided that it would be great to have a decarbonization taskforce. So a cross-functional team expert in looking at how to support the company in achieving its target. So that’s basically way it was set and when it was set.

David Linden [00:05:29] Okay we’ll well, we’ll come back to those targets, I think, in just a minute, just to sort of dive into them a tiny bit more. And but can you just explain I mean, maybe maybe I sort of gave it away in the opening spiel around, you know, what’s happening in the industry, essentially, but what is it that’s driving this idea of decarbonization in the offshore industry in the first place?

Lola Caballero Laporta [00:05:51] So I think the reason why it’s been driven, it’s very clear, right? And that is precisely because oil companies are under a lot of pressure to reduce emissions. And they have actually taken the transition very seriously. And the International Energy Agency, they actually forecast that oil and gas will still account for around 46% of the world energy demand in 2040. So for sure, we know that oil and gas will still play a critical role in the energy mix for many years to come. So we must ensure then that this challenge is met, but precisely that is met in the most sustainable way and supporting this energy transition. And I think, you know, there’s usually or sometimes then if you want underestimation of how much hydrocarbons are present in the everyday life and how necessary they are to securing these affordable and reliable energy, especially as we are seeing now with the current market and more with the invasion of Ukraine, right. Nevertheless, an absolute top priority for the world is to fight climate change and reducing emissions from the oil and gas value chain is precisely part of the solution. So I think that is a bit of the reasons why this is important and oil would be required for many years to come. And aside from the obvious transport fuel, of course, it’s still also part of, you know, building materials and medicine and roads. And our analysis shows that there will be a continued, if you want strong level of CapEx commitment from our customers to both find and as well as explore new oil and gas fields. And these precisely driven by these global energy demand that it’s not expected to decrease. So overall, you know, we strive to limit the global warming below 1.5, and then we need to do our part to be, you know, part of that transition. But we don’t do it alone and we cannot do it alone. So every company needs to if we all take our part genuinely. And I think that together we can definitely drive that change.

Teresa Wilkie [00:08:00] That’s great, Lola. So you’ve kind of told us why it’s important and you’ve mentioned the 50%, target of reducing emissions intensity. I’m you know, can you give us a little bit more detail by, you know, what else Maersk are doing and, you know, those main targets and how you set about going to achieve them.

Lola Caballero Laporta [00:08:24] Yes, I can definitely do that. So before I actually deep dive into that, I want you to highlight that, the green journey of Maersk Drilling didn’t just start, as I was saying before, in 2020, when we set up our sustainability strategy and we set up a task force to support the company in driving that. But actually, the journey started back in, I would say, 2014 when we installed our first SCR reactor. So the Selective Catalytic Reduction on a jackup in Norway to reduce our NOx emissions by almost 97%. And after that, in 2017, Maersk Invincible became the world’s first jackup running on onshore power and hence removing emissions from the rig, which actually, by the way, of course, reduces cost and also time for maintenance, for drilling engines and generators. So that’s also one big milestone that we achieved. And then in 2020 two of our jackup rigs in Norway were upgraded with hybrid package, which actually combined the use of our battery based hybrid power solutions with the same SCR reactors. And then also it includes, we call it energy efficiency software that allows you to monitor and optimize how the energy is consumed on board. And actually, we are this summer upgrading our third rig with a hybrid package. So that is a bit what milestones we have achieved before that. And by the way, these hybrid packages, they reduce emissions by 25% from the baseline and 97% on NOx. So I think we’ve come pretty far, but to answer to your question, our decarbonization strategy how we are intending to reduce our emissions by 50% by 2030 and support very importantly to our customers to reach their targets and drive their agenda? From the drilling perspective, we have two key levers. One of them is energy efficiency, and the other lever is what we call clean power sources, which basically account for the external power and then alternative fuels. And of course, the easy solution would be to just, you know, wait and have someone develop new technologies and alternative fuels would be the most direct way to decarbonize eventually. But we also wanted to lead the way, and therefore we are already or we have already started today. And these primary steps that we have taken, aside from the technologies that I was just mentioning, there’s of course, the energy efficiency. And I think that it would be interesting to deep dive a bit in that as well. So when we talk about energy efficiency in most drilling, we break it down into some levers. One of them is technical efficiency, which is, of course, all the technical upgrades and upgrading the the the equipment on board to actually be more low emission. And then there’s of course, operational efficiency and for one of them, precisely. More, operational efficiency, digitalization. I think it’s a key enabler to drive this. And I actually think we’ve also come quite far ahead. On the one hand, we have built these Power BI tools to monitor and visualize the data. So we have installed thousands of data sensors onboard our rigs and they deliver data insights into these BI tool which gives context in allow us to model if you want that’s a consumption and then identify heat and potentials and that’s what give our customers as well as our crew ideas of how can they bring change. With that intel, we have also run a campaign fleet-wide across our rigs to bring energy efficiency behaviors offshore and then encouraged to crews to optimize the way the equipment is run by also shutting off redundant equipment that you know is not needed. And through hardwiring conversations with them and this means, you know, that on a floater we can run with five thrusters instead of six when the conditions allow or with two generators. And funny enough, by just simply by changing behaviors, we estimate that we can save up to 10% of our emissions running the rig and that actually accounts for a CO2 savings of flying a on a passenger jet around 144 times. So it is quite significant. Right. So this is when it comes to see behavioral changes in energy efficiency. On the other hand, which is also aligned with our strategy, we have also formed a subsidiary with RigFlow. I don’t know if you know about it, but it is a digital solution. It’s a way to basically standardize and digitalize how drilling operations are executed on the rig from the well construction operations onshore and offshore. And then it’s basically a way to also have better planning and then remote support and be more efficient and transparent. So we also have some efficiency gains from that. And then on the other side, we also have two more efficiency levers. One is the on the gold program, which is basically a mobility platform that we are rolling across our fleet to basically optimize our processes onboard the rig where the crew can use specific mobile devices with applications to conduct their daily tasks more efficiently. And we cannot forget that, you know, these efficiency results are ultimately also translated to the client and is also a benefit not only for the climate, but also in terms of cost savings. Right. And that drove me to sort of the final efficiency opportunity. That is the reducing time. And I think that through all these efficiencies that we have just been speaking about and, you know, having these equipment running more optimally and reducing days on the operations means that that brings a lot of savings on to the drill floor. And let’s not forget that the greener or the greenest energy is the energy that we don’t consume. So I actually want to I have a good example, which is that on a field development project offshore, in Norway that we were working with our alliance partners AkerBP and Halliburton, which actually that is a great example of also how collaboration, collaborative approach can, can unlock great value. We had an initial assumption of 44 days per well, and we were able to bring that down by a different round of efficiencies to by 45%, so to 24 days in the end. So that is a considerable amount of energy saved. And I’ve spoken a lot about efficiencies now, but I think that it’s important to recognize the potential that that has. And it’s something that we can do today. It’s available, is mature, and it’s in our own hands to do something about it. However, of course, all efficiencies are critical, but we want it will not take us all the way to meet our targets. So we need some, let’s say, more long term and also there higher potential if you want technologies coming into market. And these were our second lever comes in, which is external power and alternative fuels, which are of course more CapEx, heavy and still immature technologies. But that will take us directly to the 50% and potentially to net zero.

David Linden [00:16:36] Yeah, sorry. Just on that one. I mean, there’s a lot of things you’ve downloaded on us there around energy efficiency and the role that that has. And it is interesting, I think when Teresa and I first looked at this subject with our other sort of emissions colleagues on here, it is amazing how people kind of underestimate that particular angle. I think I think almost beforehand it would be called cost savings or just efficiency and even just on the platform, if you just do things slightly differently, hang on a minute. You can actually be safer, more sensible, etc., in the way you approach things. So it’s fascinating to hear you talk about that. And we should talk about the clean energy angle in just a minute. But can I just ask on the energy efficiency side, is that something that you took on as a company because you have a target, or is this because it just felt like a natural next step anyway? Right. It sounds like if I was to take the word emissions out and I don’t want to call it a side benefit, this is stuff that people should be doing anyway. Right. It’s an industry across the board has its ups and downs. It has cycles. You know, it needs to focus on costs, etc.. But does that not mean that this is kind of core stuff anyway, but it now has an additional benefit that the emissions are also saved along the way?

Lola Caballero Laporta [00:18:02] Definitely. And as you were saying, you know, the oil and gas industry has been conservative in the way it’s been operating traditionally. Right. So I think that it definitely has been a natural step and it is something that we also started exploring many years back, even before the targets were set. So our digital, if you want it transformation also started being part of Maersk Drilling strategy for a couple of years back. And as a result of that, we have, first of all, digitalize a lot of our processes internally. Outcome of that has been some of these platforms that I’ve been talking about. And then aside of that, of course, it encompasses with what we have been explaining about the more focused on sharing of equipment that then has been more put in focus with the not the target directly but with the focus of reducing emissions as part of our strategy. And a couple of years back already we set our first drilling overall strategy that is actually smarter drilling for better value, where reducing emissions is one of the key pillars of that strategy, because we also believe that it’s very important to drive change, that it is part of the overall strategy of the company and that there are not, if you want conflicting strategies internally and as part of the smarter drilling for the better value efficiencies, what like the key driver, you know, reducing time, reducing waste, etc.. So precisely that is when the digital journey began and naturally now of course it has fed and all the data that we can collect and the, the easier that we can drive our process and the more we can optimize that everything adds up to delivering a more efficient delivery that basically that is the motto if you want of our strategy.

Teresa Wilkie [00:20:00] Lola just to take things in a slightly different direction. But we know you’re involved in a couple of other projects which, you know, certainly contribute to the energy transition as well. You know, we know Maersk is a partner in Project Greensand and you know, on our side we are starting to track the sort of CCS, CCS projects and that side of things. And, you know, we’re just interested whether, you know, you or Maersk, I should say, see that as a, you know, a demand growth area for, you know, offshore rigs in the future.

Lola Caballero Laporta [00:20:37] I think that’s actually a very interesting and very good question, especially, you know, in this period of transformation, if you one where most of our customers in this case are becoming energy companies now instead of oil and gas companies, and they’re investing a lot in, you know, solar and wind and hydrogen power, just to mention a few. So this is a very good to manage, if you want, of risk of that transition. But for a drilling contractor, it is true that it’s harder to diversify, right? Because our business is basically based in or based on assets. So at the moment, we definitely have been creatively exploring for a while different options with an open mind, but our rigs are hard to repurpose and that’s precisely where I think CCS is a great opportunity to kind of repurpose their assets. We, of course, also cannot forget that we are a technical and heavy engineering company with 50 years of experience and a lot of experienced human capital developing new technologies and have been doing that for many years and also since 2017, we have an innovation department in Maersk Drilling, looking at all these new opportunities of how much drilling can be part of this transition. As part of or a consequence of that, CCS that you were mentioning project Greensand has been one of the key projects that we have identified and that we have taken part in. As you know, of course, Greensand is part of a consortium led by INEOS oil and gas and then also Wintershall. This project is extremely interesting and it was granted a UDP funding as well in 2021 for $30 million by the end of this year, we spent a couple of years also scoping understanding how could a drilling rig best fit into that carbon capture space, right? So by the end of the year, we actually running a pilot by injecting CO2 for around three months. But basically I think it’s a project about sort of de-risking and demonstrating the technology and uncertainties of this project, if you want. But there’s actually a website that we have developed where everything is explained. If you want more information, but the project actually, let’s say that it is going as planned as well. So we actually are seeing that the rigs can have, an opportunity to be part of this new space and from that be part of the energy transition on the side, aside from just decarbonizing our main operation. So definitely a very interesting space as well.

Teresa Wilkie [00:23:27] Brilliant. And will be sure to check out that website. So it sounds like with that project, there’s you know, it’s a lot to do with sort of collaboration, lots of companies being involved. And I guess that’s something that we’re seeing a lot more of, especially with, you know, drilling contractors and oil and gas companies collaborating with, you know, some industry players who maybe have a little bit more experience in this site or kind of coming together to help each other out. So, I mean, do you think this is something, again, that could, you know, could benefit, you know, the sort of drilling industry or maybe keeping it more towards Maersk? And do you have any other, you know, sort of examples of sort of successful collaborations that Maersk has participated in? You know, on this side of things.

Lola Caballero Laporta [00:24:21] And you say the same to mean new business opportunities as well.

Teresa Wilkie [00:24:25] Yes.

Lola Caballero Laporta [00:24:26] So as of repurposing our rigs directly, I think CCS and Project Greensand is one of the main projects. But I think that we have very good examples also of collaboration. And one of them is the alliance that I actually think I mentioned before that we have with AkerBP and Halliburton. We’ve had it in the North Sea for a couple of years now. And that precisely has allowed us to work together towards thinking of different ways to operate and work towards a common goal. And of course, I think that it is an interesting alliance because, first of all, when it comes to efficiencies is really interesting. But also, when we are looking farther ahead in the horizon in the medium to long term and how can we together drive this transition? It is a perfect platform if you want or partnership to be able to drive a change and think strategically together. As part of that, we are of course investigating a couple of different projects and we’re investigating how can we together as an alliance, drive the or be ahead of the, if you want, of the industry to drive change when it comes to emission reductions with fuels and shore powers and hybrid packages. So when we look at other contracts, for example, and the nature of the emission reduction, when contracts are shorter, that doesn’t allow you so much room or opportunity to invest in low emission technologies and low emission solutions, because also we need to remember that you need to monitor the data, you need to understand how you are consuming your energy onboard. And then based on that, also come with those solutions. When the contracts are very short, it doesn’t allow us so much to identify those opportunities. Having an alliance that looks in the long term is a good example of how you can collaborate to look at the time and farther into horizon. And aside of that, we are talking a lot about our scope one emissions here of how can we reduce the emissions from our drilling operations? But we cannot forget that there’s also a big portion or a large share of the emissions of the industry come from scope three, which, you know, includes the whole value chain. And I think that’s precisely where an alliance is a great opportunity to tackle that. And together, trying to solve and reduce their emissions from that are more indirect from the entire value chain. So we are also working together on that space. So yeah, this is a bit of how I see that. That is a good example also of how you can collaborate as an industry and that can bring sort of a lot of value to the way that you are doing things and have been doing things traditionally.

David Linden [00:27:32] Very interesting, there. I mean, collaboration is definitely king in much of this, but when it comes to a lot of these efforts, often it comes down to saying, well, actually it only happens in the North Sea or only happens in places like the Gulf of Mexico or so, where well, a) companies that you or your clients have got some net zero targets. And b), you know, there’s enough activity and incentives in place to make this happen and. Well, first question is, and i’m making it a two parter, apologies. But is that true? Is it really just the North Sea, maybe even Gulf of Mexico story? And that’s because that’s where the incentives sit. Or is this actually something that’s happening, you know, globally right now? And, you know, I’m going to split it into a third part and go and ask you why?

Lola Caballero Laporta [00:28:24] Sure. Yes. And I need to remember the question. No, I just think that, you know, just like in any other industry, there, of course, are some areas that are more committed, as you are alluding to, than others. And, of course, Maersk Drilling we are interested in working with companies that are as committed as us. But we are also trying to bring these learnings if you want to other regions and other customers. It’s true that, you know, we do see that most customers are playing a lot of it at paying a lot of attention now to lowering the carbon footprint of the operations and how they are transitioning, if you want, from oil and gas to energy companies. And in fact, we are starting seeing that they are, you know, making part of their selection criteria, emissions reduction for when they’re looking out for suppliers. But it is true that, as you were saying, a regulatory framework is very important. So when it comes to CO2 intensity per produced barrel, Norway, of course, is where, you know, they clearly have the lowest, if you want one of the lowest upstream CO2 footprint. And there are several reasons for that, especially one of them is because already in the seventies, they banned routine flaring, which, of course, you can reduce a lot of your emissions if you ban that  routine gas flaring. Right. But aside from that, they have adhered to the EU ETS and they have also introduced a carbon pricing mechanism already in the nineties. So all these incentives have allowed and, you know, pushed the energy or oil and gas companies if you want to be more conscious and invest more in low carbon solutions. But I think that that is Norway. And as you were saying, I don’t want to talk too much about it because but it’s just a way to exemplify how can these regulatory regime support and do a lot? But we are definitely seeing that the interest is picking up in other regions. And one example, for example, is in Africa, where we have had big support from our stakeholders, both from the customer especially, but also from regulators. And they really have been challenging the operations and the collaboration, bringing them up to reduce emissions. And a concrete example that I can give is in one of our floaters, one of our drillships in Angola. We actually managed to cut almost 4% of our emissions, which is equivalent to around 350 metric tons of CO2 over a three month period, simply by running with two generators a high load instead of three. And that has been a result of collaboration, great collaboration with a customer who were challenging and saying, why don’t we do it this way? And then instead of just saying, okay, by default, we do it like that, they say, okay, why don’t you tell us when you go to three generators instead, two really challenging that. So we are actually seeing that that is coming to other regions is not just in two regions of the world but is actually getting much more globalized, if you want now. But again, all these learnings that we have, they can be replicated everywhere and then combined with other efficiency behaviors. You can see that the potential use is relatively actually significant.

David Linden [00:32:02] Just as a follow up from that, just the one thing we have seen and we had a podcast not too long ago with a company focused on Africa as well and is precisely, you know, is very interesting on that front that clients now see or certainly your clients see themselves as being differentiated by focusing on things like emissions reductions, etc., through the supply chain. But also when it comes to the producing field, it’s an incentive to differentiate. But it’s also important now if you’re thinking about financing and all that aspect. So this issue or this opportunity, should I say, really permeates throughout the thinking process in many companies now, which is probably one of the reasons you do see it in a place like Africa and not just somewhere like Europe. But Teresa, sorry I interrupted you as you were about to start a question. So apologies.

Teresa Wilkie [00:32:56] It was just more of a follow up question actually, Lola, I was just wondering whether you are seeing more and incentivisation really from operators on, you know, to drilling contractors to reduce emissions during drilling campaigns?

Lola Caballero Laporta [00:33:14] Definitely and I think, you know, as you’re alluding to financing and in this case, of course, constraints can definitely be one of the key challenges here. Right. So, by the way, we have been operating and lately precisely in this space is, as we were just talking previously, very collaboratively based. So it’s that’s been part of Australia’s strategy for many years. And I think that because as a result of that we are definitely seeing that, that the operators are incentivizing us and the contracts now even include those incentive schemes. There are different models of course of incentive schemes, right. But they are very open to either co-investing with us in some of these technology upgrades to enable a low emission operations as well as sometimes there are also models where you basically from a baseline that we’ve been calculating from historic operations in similar environments or from operations from that concrete drilling a unit in the same location, we make a baseline. And then out of that you actually, you know, get a portion or divide the savings somehow. So there really has been a big open if you want a discussion on how can we together be incentivized to drive that and then share the benefits from that, that collaboration and from those CO2 savings that basically in the end, it’s why we are doing things differently as well. Right. So but of course, a side of that, as we were alluding before, having regulation and legislation supporting will definitely also be paramount to support and enable that transition. And we believe also that a carbon tax can make low emission technologies, these technologies. Maybe now are less attractive. It will make them especially the more heavy CapEx, maybe once more attractive going forward. So but that, of course, is still in some areas of the world being introduced. And then in the others, of course, it’s more in the long term that will come. So we are definitely seeing a very, very good collaboration and into funding these technologies together.

Teresa Wilkie [00:35:37] And, you know, you’ve talked about some of the challenges, cost constraints, you know, maybe a lack of regulations or legislations in some regions, things like that. But I mean, is there one challenge that you think is kind of the biggest kind of hold back facing the offshore rig industry in lowering its emissions? Or do you think it’s more of a combination of several things?

Lola Caballero Laporta [00:36:02] I definitely think the key challenge is the cost aspect. Right. And the access to funding also from that. It is true that now in the current market that we are in and how oil and gas, it’s for sure and it’s been demonstrated also in the last few months that it would necessarily be part of the energy mix there going forward. Also now, you know, with the new EU taxonomy making gas also sustainable and part of the transition, we will see that there will be more investments. And it’s true that investors are starting to look again at the, if you want, drilling industry, but with a more green mindset and that they can, they see now that they can invest and engage with sustainability leaders in the fossil industry. So we will see opportunity for that. But that is of course one of the key constraints. And also I think that another aspect that we haven’t touched upon is the fact that our assets are built to last for many years. So it is also harder if you want to just go and order a new low emission rig. Right. So retrofitting our assets is one of the, you know, most if you want opportunities there, direct opportunities that we have to drive these low emissions. And precisely because of that, there also needs to be a lot of engineering studies conducted to understand how can you make those changes to your rig safety wise? Also, it needs to be a very critical that you have those assessments. So I think that the nature of our assets also puts a constrain to why it is also harder to reduce emissions in our industry.

David Linden [00:37:46] Yeah, it’s an interesting one. So it sounds almost like a mirror of the discussion that’s happening at the moment between you say UK, Norway is two countries that why is one as you saw talked about earlier why is one got such a low global carbon emissions intensity for the upstream sector versus the other one and there are several incentives in place. But one thing that’s very different also in Norway, as an example, is, is the whole set up is a couple of decades later than the UK. Right. So you don’t have all this old fragmented infrastructure sitting around that sort of been built up over time. You’ve got large efficient platforms that you can, you know, plug into, well, a hydro-based grid essentially as well to electrify, etc.. And so the discussion that’s happening in the UK about how do you electrify platforms are so very different to the one that’s happening in Norway just because of the geography, the set up, the history and that’s the same I guess here someone’s got the luxury of a bunch of new kit essentially, and you just need to upgrade a little bit versus someone who’s got a lot of old kit and needs to think, Well, how do I re-engineer this to make it essentially practical and fit for the future? That’s a much harder conversation to have.

Lola Caballero Laporta [00:39:08] Completely. And I think that also we need to remember that we, our industry, the drilling industry offshore precisely is hard to electrify. Right. Because as you’re saying, when we are talking about the North Sea as an example, even it is easier. There’s still even a lot of challenges when it comes to, for example, voltage and frequencies. It changes from field to field. So the fact that you have upgraded one of your rigs to be able to run onshore power in a specific location doesn’t mean that you can later plug it in another location. So that adds already a challenge in there. But aside from that, we have a big portion of our units are also deepwater, right. And they are farther away from shore. So in there you cannot rely on shore power, but then you need to start looking at external power and external power. If we think, for example, of floating wind or floating solar, it’s super interesting to technologies that will come into play by these still also farther into horizon. So you need to, start doing something with what you can have available today as well. So definitely that is also part of of the electrifying a rig, is part of the challenge as well. And it comes with the nature of our assets.

David Linden [00:40:23] Okay. So if I hear you correctly, then and we cut you off earlier, actually, when you’re talking about your two main areas between efficiency and clean energy. So apologies for that, I think it was just an interesting point to talk about the efficiency angle. Is it fair to say that the efficiency side of things is therefore what I would call the low-hanging fruit in all of this? And a lot of the challenges really start to play when you’re looking at the clean energy side, and I’m generalizing, to be fair, but that’s where the collaboration becomes even more important. The technical complexity is higher, and the CapEx angle plays a bigger role, and therefore things like having the right regulation in place, having investors on board, etc., that’s where really the nub of the problem, call it a problem, let’s call it an opportunity again, lies. But those are the challenges that become bigger and that aspect rather than the efficiency angle. Is that fair to say?

Lola Caballero Laporta [00:41:24] I think it’s very fair to say. And I think you put it very well. And yeah, we spoke a lot about efficiency. So it’s fair enough that we talk to deep dive a bit more into it. But alternative fuels and external power, that is that technology that will be the driver to reach those targets. Right. Or to get to that 50% and potentially to net zero. But as you were saying, the CapEx is much heavier than in the energy efficiency, which as you were saying as well, it’s the low-hanging fruit. But I’ll tell you one example is something that we are also very closely monitoring and we definitely expect that they will have an active role in the development of our industry and as well as for us. And as you were saying, collaboration here, it’s precisely, very, very important. And when regulation will make that the if you want, abatement cost of these technologies will be, you know, more and more attractive to invest in. But I think that it’s also important to highlight that timing is also very important here. And we are monitoring the fuels, but we expect that, you know, we are monitoring them all, but we expect that methanol actually will be the soonest if you want low carbon fuel to be available at scale. So that is where we are looking a bit or rooting as of today. And in parallel, until these these technology is mature, we already have a solution available now that actually I think it’s important to highlight, which is a renewable diesel and Maersk Drilling as part of our, you know, decarbonization efforts. And in order to all to provide a be able to provide a solution to our customers, an immediate solution, we run a test on board one of our jackup rigs on HVO, which is hydro-treated vegetable oil. And we managed to actually reduce our emissions by 94% certified. So, you know, that really shows that there are solutions now. And one of the good and very positive things about HVO renewable diesel is that you don’t need to really upgrade and retrofit your engines and your rig is just a blend in so you can really pour it in today and add the percentage that you want to. Actually, you can run on only 20% biofuel or you can run and turn on 100% biofuel. But of course, you know, the long term availability of the feedstock is also another conversation to have. So that’s why we are looking at the sort of low carbon fuels for the future, which come with big investments and repurposing of the rig as well. So there’s a lot to play in there for sure.

David Linden [00:44:16] It is interesting because of course, pretty much any oil major now is saying that biofuels is a core part of their future strategy. So I’m going to ask a challenging question because my knowledge is not as good as Teresa here on the rig market, and certainly not as good as yours, Lola. But is it not fair to say that a lot of the fuel typically gets provided by the oil and gas operator themselves? Right. So is there really, shouldn’t the incentive or the angle be that these are the companies that go, “Please use this biofuel” that may be their biofuel arguably, agree to run your rig on because it’s an incentive for me because it’s good for me to lower my emissions. I have to count them because you’re a part of their emissions count. Right. Essentially, depending on how they do their math. But I would say it’s a scope three part of their business and it’s an incentive. It’s a demand center for their fuel going forward. So that’s a positive as well. Does it lie in them always? Actually, the reality is, yes, it could do. But the infrastructure to deliver it to you in the first place, make it available. It’s just not there.

Lola Caballero Laporta [00:45:25] I think there are different points in there. So definitely, as you were saying, the industry has traditionally been operated in a way that the drilling, like the operator is the one coming with the fuel. Right. So of course that poses like a first if you want challenge or seeing it as an opportunity where you know, they also have power there and how can we run our rigs. But of course, these renewable diesel, it comes at a cost and it comes at a high cost. The cost is very volatile, of course, but is still a big difference compared to regular marine gas oil or marine diesel oil. So we are running this test to provide that opportunity, but there definitely needs to be that incentive for them to also run that. And that and that’s where, you know, the whole accounting piece that you were describing comes in because they, of course, have the benefit of reducing their emissions and accounting for all that big savings that running which renewable diesel brings. So definitely that’s an incentive there. And that’s also when tax start coming into play a bit harder, a carbon tax, they will have an even bigger incentive to do that because then this technology, if you won, will be more affordable. So definitely that is, you know, the setup of the industry poses like that complexity if you want to. How much power do we have to run on a fuel or another? But actually our emissions, they account in their scope one of our operators because they pay for the fuel. So, it really is even higher on the agenda to reduce their emissions from the drilling operations because these are a significant part of their direct emissions. Right. So the incentive is there. But of course, you know, it’s still early stages and this transition, it’s going to take time. So identifying those opportunities, looking out at the market, testing them and providing that to the customers and then together with them, starting to incorporate them in the day to day of the rig. That’s what we are starting to see and that we expect to see much more going forward.

Teresa Wilkie [00:47:36] Hopefully, you guys don’t mind me again, kind of moving in a little bit of a different direction. But you know, I think one of the you know, the main topics and very serious topic, obviously, that we’ve kind of all been discussing over the past few months is, of course, the, you know, the invasion of Ukraine. And that, you know, this has really emphasized that the necessity of global and energy security. And, you know, because of this, there’s this likely short term need for increased offshore oil and gas production and drilling activities. You know, but as well as, of course, you know, that increased investment in renewable energy as well. And, you know, I guess the question really is, can we find that sort of balance between energy security and energy transition? Or will, you know, do you think one of these, you know, will sort of the importance of one will outweigh the other?

Lola Caballero Laporta [00:48:35] And I think it’s a really good question because I think that we definitely can find the balance in the short, in the medium and actually also in the long term. You may think, and that’s true, that the rhetoric now is sort of shifting to focusing more on energy security now than on energy transition. But energy security and climate change are, I would say, strictly interlinked. So choosing one over the other, I don’t think it really makes sense. And we believe in the energy transition. And although we could have it’s true that we could have a concern that the current global situation will slow a bit down the transition or the energy transition efforts. We do not necessarily see that happening. And first of all, also, you know, the International Energy Agency said Pathway to Net Zero predicts that, you know, to ensure the supply levels, an average of I think it’s $340,000,000,000 a year over the next or the rest of the current decade will be needed in the oil and gas fields. But we cannot forget that there’s been a lot of years of underinvestment in the E&P sector. And also with COVID, it was thought that demand would never go back to pre-2019 levels. And as you were saying, theories that there would be a shift towards energy, much more aggressive. But actually, the contrary has sort of happened. And now with the current market situation, oil and gas has come back stronger than ever and in the past few years. So but I certainly think that also has is an opportunity, because precisely this market and these high prices have created a large profit in the industry, in the oil and gas producers. So that is also, of course, an opportunity for them to use that cash if you want to invest it in the energy transition. So definitely I think that the balance can be found and also, you know, many of our customers and suppliers as well as the government bodies that we were talking about before, they have integrated energy transition in their agenda and their strategies are also very aligned with this company wide. So they are making a lot of efforts within this space. So we all need to continue taking the responsibility. And I think that definitely that balance can be met.

David Linden [00:51:14] Well, as always, on these things, you start to run out of time, but there is still just one sort of final question. I also and may be it’s a difficult one to answer, Lola, but in terms of all the things that you’ve talked through, you know, there’s clearly some great things that you’re doing as a company. There’s a lot of things that can be done, more that can be done, etc.. What is it, though, in your mind that kind of needs to be done more of now? Well, what are some of those things that you can action? Is it in your mind about we just got to wait till the regulation turns up or is there actually sort of action points that people can take away as to how to deal with this next?

Lola Caballero Laporta [00:51:53] I think that, you know, everyone has its part to play and we can all we can’t just sit around and wait for the regulation to kick in and then allowing that or incentivizing that to make everyone go in and start doing their emissions reduction journey. So I definitely think that the key takeaway is that we need to start now, we should have started already, and that we need to put full gear on with this because the climate is not going to wait. Climate change is happening. And then even though we are in a, you know, heavy consuming industry, if you want, we definitely have a big role to play in that transition, to continue being part of the growth, but making it in the most sustainable way. And as we saying before, and it can be a topic, but I think that collaborating, it really will drive that change. While that regulation in between the regulation comes into play.

David Linden [00:52:56] Very interesting indeed. And very much agree as well. Well, thank you, Lola, for your time. Really appreciate it. That was very insightful. Thank you for sharing. Well, first of all, I guess around what Maersk is doing in this space targets, you’ve got, you know, how efficiency in clean energy is kind of a core part of how you’re approaching that. But also, I like your points around the open discussion, the collaboration, but also the balance with regulation to make that happen. So. Good luck certainly with all the things that you’re doing and there’s a lot on your plate. So good luck with that. And hopefully when you do get to go on your holiday, you managed to relax a little bit as well.

Lola Caballero Laporta [00:53:38] Thank you so much for inviting me, both of you and Theresa. And yeah, it’s been wonderful to share a bit more. And definitely we have a big and long and challenging journey ahead, but I’m sure that we will make it happen together as an industry for sure.

David Linden [00:53:54] All right. And thanks, everyone, for listening as well. Hope you enjoyed it. Please make sure you subscribe. Give us a good rating and share with your friends and talk to you next time.

 

 

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