In 2021, Chevron Technology Ventures invested in Baseload Capital and began a pilot project that aimed to utilize waste heat from Chevron’s existing oilfield operation in California, USA. The pilot, which began operations in July 2022, demonstrates the potential of using existing oil and gas wells to also extract geothermal power.
Chevron isn’t the only oil and gas company to have embraced geothermal energy. Baker Hughes, is a company that provides the oil and gas industry with products and services for oil drilling, formation evaluation, and production, among other things. In March 2022 it announced an investment in GreenFire Energy Inc., a company that specializes in closed-loop geothermal systems. Together, among several other projects, the two plan to expand the development of geothermal resources by retrofitting existing non-producing geothermal and oil and gas wells to closed loop heat producing wells for power generation and direct use applications. In addition to Chevron and Baker Hughes, Halliburton and Schlumberger are also getting involved in geothermal energy.
Geothermal energy represents an especially fantastic opportunity for players in oil and gas as drilling and construction work for geothermal is similar to what is required for oil and gas which means that skills can easily be transferred from the incumbent to the fledgling.
Making the shift towards green energy is essential for oil and gas incumbents to stay relevant as more and more countries are prioritizing moving away from fossil fuels towards clean, renewable sources of energy. Oil and gas companies that fail to diversify risk going out of business. While they can keep operating as they are in the short-term — as demand for fossil fuels will obviously take time to fall — to remain relevant over the course of the next decade or two as demand for fossil fuels falls, they will definitely need to pivot away from their current core business.
Since fossil fuels aren’t only used for energy and the generation of electricity but are also essential other industries including natural gas for fertilizer, and crude oil for the manufacture of plastics and certain cosmetic and pharmaceutical raw materials, at least some extraction of fossil fuels is likely to continue into the future since we may or may not be able to find suitable raw materials to replace everything.
Nevertheless, with the growing demand for clean, renewable energy sources, the energy industry is undergoing another transformation that incumbents must be able to keep up with. Aware of this, many incumbents are looking for new opportunities in the renewable energy sector, and geothermal energy presents a compelling opportunity for them to do so for two main reasons, among others: it leverages their existing experience and expertise, and creates synergies with existing operations. Let’s dig deeper.
The oil and gas industry is under increasing pressure to become carbon neutral within the coming decades. Geothermal energy is an opportunity for oil and gas companies to diversify their energy portfolio, reduce their dependence on fossil fuels and lessen their carbon footprint. It also represents the rapidly growing renewable energy market and is well positioned to benefit from the growth in the sector as it is a fantastic source of clean energy as I’ve already discussed at length here.
In addition, harnessing — or more aptly drilling for — geothermal energy requires many of the same skills as drilling for oil and gas. Geothermal energy projects are complex and involve many technical challenges such as managing high-pressure and high-temperature systems, drilling wells, and integrating energy storage systems. Oil and gas companies have the experience and expertise needed to tackle these challenges and they can use their knowledge to optimize the performance of geothermal energy projects.
These companies also have a wealth of data and information that can be applied to the development and commercialization of geothermal energy. They have been exploring the earth for decades and have valuable information that can be used to improve the understanding of geothermal resources, to identify suitable locations for geothermal projects, and to optimize the design and operation of geothermal plants.
Many people who’ve traditionally worked in oil and gas are also seeking greener jobs while others may find themselves out of work as the fossil fuel industry declines. However, because of the inherent similarity between drilling for fossil fuels and drilling for geothermal energy, the latter is a great fit for oil and gas workers. In fact, some people working to develop geothermal energy are former oil and gas senior executives. Other renewable energy technologies like solar, wind, hydro, and nuclear power require very different technologies.
Geothermal energy projects can also often be integrated with existing oil and gas operations, such as co-locating geothermal plants near existing oil and gas facilities and old oil and gas wells can be repurposed for geothermal energy. This can help to reduce costs and increase the efficiency of geothermal energy projects as the infrastructure and support systems required for geothermal energy can be shared with existing oil and gas operations. Geothermal energy projects can also help to support existing oil and gas operations by providing a source of clean energy. For example, geothermal energy can be used to power oil and gas facilities, reducing the need for fossil fuels and reducing emissions. This can help oil and gas companies to meet their sustainability goals and improve their environmental performance.
“According to the U.S. Energy Information Administration, there are 483,326 gas producing wells that are active in the United States, and it’s forecasted that 22,600 new wells will be created in 2022. The U.S. Environmental Protection Agency estimates that there are more than 3 million total abandoned oil and gas wells.” — Geothermal Rising
Lastly, oil and gas companies often have access to large amounts of capital, which can be used to finance the development and commercialization of capital intensive geothermal energy projects.
Geothermal energy presents a great opportunity for oil and gas incumbents, offering a way to diversify their energy portfolio, capture a share of the growing renewable energy market, and support their existing operations. By leveraging their experience and expertise and creating synergies with existing operations, oil and gas companies can take advantage of this opportunity and play a leading role in the transition to a clean, renewable energy future.
