The importance of Deutsche Bank’s decision to pull back from oilsands and what it means for oil and gas
Deutsche Bank’s announcement that it is pulling back from financing oilsands projects adds to momentum that has been building around the natural resources sector for some time. The announcement was covered in the Calgary Herald in an article that discussed much of the positive work that the oil and gas sector has undertaken in recent years to improve efficiency and transparency and reduce costs and waste.
Deutsche Bank’s move away from supporting oilsands projects is another milestone in the world’s journey towards a more energy efficient future but it doesn’t come out of the blue. As we discussed in one of our recent articles, according to The Economist, energy’s weighting on the S&P 500 dipped below 5% in June 2019, less than a third of its 2008 level. Meanwhile, the European Investment Bank has decided to stop supporting oil, gas and coal projects by the end of 2021.
As the Calgary Herald’s article points out, the decision to reduce investment in the oil and gas sector could be based on pressure from what some say is an overly vociferous environmental lobby that tends to ignore the positive work that the natural resources sector has carried out over the last few years to reduce waste and improve efficiency. The problem for the sector is that the work that has been done so far has not been enough to silence the critics, and Deutsche Bank is not the first major bank to move to limit its involvement.
Investment decisions are not zero sum
The challenge for the oil and gas sector is that it is under pressure on multiple fronts. When it comes to investment decisions, it is rarely a zero sum game. Yes, the environmental lobby can be vocal, but that’s only one part of the decision making equation. Questions about efficiency, transparency, cost and waste are also major considerations in the decision about whether to support a specific project, a region or an entire sector.
If it was just the environmental lobby being vocal, it could be ignored (as it could be suggested that it has been for the last half a century), but potential investors are also listening to the tales of waste from flared gas as well. On top of this there are rumblings from regulators, who look at the achievements in the financial services sector in terms of transparency, compliance and investor protection and are asking why something similar can’t be achieved in natural resources, as we discussed in this article.
Some of the answer could be simpler than you think
One thing that biologists and business leaders tend to have in common is that they both believe in evolution: Change is constant, and it happens whether you like it or not. Any business that tries to do the same thing the same way year after year is unlikely to survive in the medium term, particularly in our Covid-19-driven reality.
The blockchain offers an opportunity for oil and gas firms to evolve, reduce waste, increase transparency and prove that they are making the best use of the world’s natural resources without the need for major investment or significant change in current ways of working.
PermianChain has been developing a platform that meets several of the sector’s key challenges. By using a blockchain-based bureaucracy, we can automate many of the manual back-office functions that slow down a project. With a consistent paper trail working all the way through the process, it becomes simple to track down the status of a project and identify and manage hold-ups and easier to respond to regulators. It also means that projects can be listed on a global platform to attract investors with far lower barriers to entry. This is achieved through back-office efficiency as well as by reducing the need for brokers to be involved in the process. Taking out their associated fees is a significant enhancement to a project’s costs.
Simultaneously, we have developed a way of putting previously wasted or flared off gas to good use. By placing inobtrusive server farms onsite at an oil and gas project, powering them with gas that would otherwise be wasted and selling their processing power to global technology projects, we create a new revenue stream for oil and gas projects and make use of gas that would otherwise be wasted.
The oil and gas sector is going to go through a period of rapid change as a result of Covid-19 as well as wider pressures it has been under for several years. Deutsche Bank’s move away from oilsands is simply the next step on that journey. The industry will continue to play a vital role in the global economy for several decades to come if it embraces the opportunities that are already available to it.
PermianChain is a proprietary technology platform that brings together the crypto-mining and oil and gas sectors. Using a permissioned access blockchain, PermianChain makes it possible to utilise stranded and wasted energy resources, unlocking liquidity and transforming the way that oil and gas projects are funded, produced, bought and sold. Established in 2018, PermianChain Technologies is a pioneer member of the Blockchain Research Institute (BRI) and start-up member of the Petroleum Technology Alliance Canada (PTAC).