Coming Clean – Cracking the Sustainability Advantage: Part 1

In part 1 of this special sustainability-focused thought-leadership miniseries on the podcast, Ben Sawford, KBR's Vice President of Global Consulting – Energy Transition and Sustainability, discusses the art of the possible around global energy transition. Why does energy transition matter? What factors will drive it? What are the challenges? And what does the future look like if the world gets it right?

New episodes in this miniseries will be released quarterly.

Transcript

IN ORBIT: A KBR PODCAST

Season 2, Episode 2

“Coming Clean – Cracking the Sustainability Advantage: Part 1”

INTRODUCTION

John Arnold

Hello, I'm John.

Lubna Salim

And I'm Lubna and this is In Orbit.

John Arnold

Welcome, welcome, welcome to the podcast. We are so glad you're with us. If you're a faithful listener back for more, thank you for tuning in again. And if you're a newbie, welcome.

Lubna Salim

For those who don't know, this is a podcast for everyone inside and outside our business that talks about what's happening around the world and in various industries. And that keeps us all connected and in each other's orbit.

John Arnold

Lubna, how are you doing?

Lubna Salim

I'm doing very well. Thank you. How about yourself?

John Arnold

I've got a little bit of a sniffle, but otherwise, things are good. I'm sorry that it is so late there for you, but thanks as always for sticking it out.

Lubna Salim

But it's always, always real fun chatting with you. And this time we just have each other and kind of missing Jo.

John Arnold

Oh, yeah. I know.

Lubna Salim

But hope she's listening wherever she is.

John Arnold:

I know, yeah. Well, despite our sadness, I am kind of excited because we're doing things a little different this week for the show.

Lubna Salim

That's right. And this, for our listeners, is the first episode in a series that we are calling, “Coming Clean – Cracking the Sustainable Energy Advantage.” So in this series, we'll be presenting new episodes — it's a thought leadership series — and the new episodes are going to come in every quarter and they'll cover some of the major topics related to sustainable energy. And we are super-duper excited that with us again for this series is Ben Sawford, who's the vice president of Energy Transition And Sustainability at KBR.

John Arnold

Yes, we are very excited to feature Ben in this series. He's once again speaking on some extraordinarily important subject matter. For regular listeners of the podcast, they may remember Ben was a guest on, I believe it was, episode six in season one. I definitely encourage you, if you haven't already, to go back, check out that episode. If you haven't heard it, it's a great companion piece for this series, and particularly for this episode, because it also addresses today's topic, which is energy transition. What's different about this episode that we mentioned up top is that we've got a guest interviewer this week, Nick Easen, a journalist in the UK, and he is speaking in a conversation with Ben about what energy transition is, why it matters, what the main barriers and challenges are, but also what happens if the world gets it right. Very important stuff. So Lubna, without further ado, should we give it a listen?

Lubna Salim

Oh, yes. Let's get started.

John Arnold

All right. Here we go.

TRANSITION

Nick Easen

Hi. My name is Nick Easen and I'm a journalist and I'm on an inquiry journey with KBR. The theme of this podcast is the global energy challenge, and I'm joined by Ben Sawford. He's KBRs global vice president of sustainable energy. Welcome Ben and thank you for joining me today.

Ben Sawford

Well, it is an absolute pleasure to be here, Nick, and I'm really looking forward to this chat.

Nick Easen

Yes, so am I too actually. And as an introduction, the global energy challenge is a way for us to understand what the real issues are. And new thinking on the global energy transition is really needed today if we're to navigate the landscape for energy tomorrow. We'll focus on the challenges of addressing growing energy demand while also reducing emissions and the wholesale shift to a new zero-carbon world. We need to get this right, or we can expect many more energy crises in the future. The fact is, there is no master blueprint everyone is working to. Many new energy systems are not even off the drawing board. This is why we need new thinking in this space. What is the art of the possible when it comes to the energy transition? So Ben, first off, why does the energy transition really matter?

Ben Sawford

So, Nick, there was a bit of a tongue twister there from what I just heard. What does net zero — I think even as an accomplished journalist, you tripped over yourself and that's the problem. We are tripping over ourselves. And maybe a good place to start at the top is why on earth does energy transition actually matter? The kind of, “So what?” question, if you like Nick. After all —

Nick Easen

Yeah, I'm really interested.

Ben Sawford

Yeah, we've kind of got an abundance of fossil fuels globally. If you look at what Shell outlined a few years ago, peak oil demand was 2019/2020. There is plenty of hydrocarbons in the ground. Investment decisions for new sources of hydrocarbons are still out there. And the investment decisions for fossil fuels are coming through now. Is it sustainable though? That is really why: why in earth do we care about it, and why do we care about it right now? “Sustainable” for me is probably with a capital S. By that I mean sustainable economics, sustainable social betterments. And of course, what people actually assume sustainability means, which is good for the planet. And sustainability for me is all three things — people, planet and profit. And that for me is, “Why does energy transition matter?” It's about sustainability.

So I think COVID has probably taught us many things. And for me, not least actually, washing your hands is quite a sensible thing to do. Quite why it took the pandemic to teach my kids to do this, I'm not too sure. But on COVID, I see that it slowed the global economy and I'm sure everybody listening to this has seen that as well. It's realigned our priorities. It's opened people's eyes to what I would say is the art of the possible. And in doing so, it's accelerated the already accelerating energy transition. It was already there, but if you think of S curves of technologies, as many engineers and scientists do, it's really accelerated that, Nick.

It's accelerated the evolution into that space. And going to your questions, “But why do we care?” Well, if as a business you don't care about it now, I actually believe that you're going to lose out. You're going to lose out in the short/medium term if you don't adopt new technology, if you don't take advantage of your market position. And it's not just as energy, but it's also the service economy as well. Think data, think data centers. Think Amazon — think Amazon going green for data centers, and think all of the supply chain that goes with that. That is critical. It's not just about technology, it's not just about tree-hugging, and it's not just about the technology, the clever stuff. The pace of change is absolutely enormous. It's not new. And it's what human beings do. We like to progress.

Nick, I often look at things like Spotify. Spotify and Apple Music, music-sharing websites. They took the record industry, the music industry by absolute storm, right? And if you look at what Decca Records were offered and Sony Music were offered, they were offered a digital platform, but they refused to take it. And what happened? Somebody else stepped into that space. This is not new. This is all about decentralizing. This is simplification. This is people taking control of what is fundamentally very important to them. In that case, music. In this case, energy transition. And I think we can build efficiency economies, economies of scale, and it all rolls into sustainability. You cannot do that though without government policy, and that will drive environmental policy. That will drive climate change change. That will drive all of the matters of instinct that we want around things that came out of COP26.

Nick Easen

That's great, Ben. And I think you've really encapsulated why we need to shift the dial in thinking on this.

But we talk about shifting the dial in thinking on this, and you talked about the art of the possible. But what are the real challenges and issues in shifting our energy mix? What do you see as the big issues here?

Ben Sawford

The big issue is who's involved. It's really around, are you dealing with progressive companies or are you dealing with heritage oil and gas/energy companies? And there's no doubt that heritage oil and gas companies have absolutely stepped up to the plate. They are doing the right thing. But it's different. So what I actually feel is that progressive companies have shifted the dial and dramatically, as I've just said, over COVID, dramatically over COVID. I don't actually feel it. I've seen it. It's happening. And these are pioneers. These are the gold rush pioneers that are coming in here. This is pioneering. And we are seeing massive, massive disruption in the market, from the geopolitical perspective and economic perspective. And when you conflate that with the economics currently, that we're seeing of gas prices, of energy prices, there's an awful lot of opportunity for new companies and new entrants to enter.

And for me, I look at this as kind of laggards and progressives. And the progressives are probably those that I would ... I'd probably characterize as having a heritage portfolio of fossil fuels. I wouldn't say it's necessarily a liability, but it's something that they have to green because that's the way the market is going. They're having to support their P&L, their R&D, their research and development budgets are really — they're ones that have been propped up for many, many years, and we're talking billions of dollars. But it's been associated with fossil fuels and the supply and demand of that. And that supply demand has absolutely changed.

The new entrants, however — or as I've earlier described as progressives — they've got very little association with that technology. They are, from a sustainability perspective, people, planet, profit. They're really market collaborative. They want to work with people. They don't really ... they're probably technology agnostic. They don't really want to be associated with any particular technology. We're talking Amazon, right? We're talking Trafigura, in terms of traders. We're talking mega investors from sovereign wealth funds that are trying to get a hold on a new market.

And it's part of a decentralization, really. And it might, to some, look slightly chaotic. But if COVID's done anything, it's actually focused the mind. And we've definitely seen that in different parts of the world. The free market economies, combined with some decentralized thinking, as well as different governments that have got very, very centralized thinking. The likes of Japan, Korea, I don't know, Singapore and Saudi Arabia. We're seeing it in Oman, in Australia. And also, actually here close to home in UK, Germany. They're working really closely with business. They're dealing with policy. They're bringing financial institutions in. And they manage, really, they manage very effectively that whole supply chain, which is so important to make the market work. And we definitely saw that in COP26, Nick. I think COP26 this year is what really triggered all this off to, really accelerate it and go through that S curve further increasing in gradient.

Nick Easen

That's really interesting, Ben. And you've touched on many, many areas there of policy and business. And so, what are the other real drivers of change, and how important is finance in this equation, for instance?

Ben Sawford

Well, financiers will flock around honey, won't they? To anything that gives a return on investment. And I guess global population is only going one way: it's increasing. And as populations increase, so does the need for energy. And as populations transform from developing to developed, so again does prosperity and life expectancy and, therefore, energy demand. It's kind of obvious. The key there is there isn't enough energy in the world currently. We're seeing that right now with energy spikes and energy prices. And therefore, the mix of energy is going to change. And therefore the investment in energy is absolutely going to change. The attractiveness, therefore, for financiers, obviously driven by demand, that's got to drive innovation. Supply change evolution has to change. And therefore, as I said earlier, that whole S curve of bringing in new forms of energy is also going to transform.

And we've seen that over 200 years. You've seen it again from, as I spoke earlier, just with simple things from Spotify ... into Spotify, I should say, from vinyl. But you've also seen it from VHS to DVD to film camera to digital. These things are always, always going to change. And financiers will grab hold of that. So I think that's really what is shifting our mix. It's happening now. It's absolutely happening now. And in probably the last year or so, we have seen, I don't know, five or six concept studies of what I would consider power to X. And what is that? That is taking cheap electrons or what would be considered cheap electrons — so stuff out of solar and wind and geothermal — and turning them into something. It's a concept that we came up with about four or five years ago, as KBR. Turning them into something that is tradable. Because quite often those electrons are in places, parts of the world, which you can't really have a have an offtake. But if you can turn them into a molecule, they have actually a use.

This year is the very first year in my entire career where I've kind of come back into the office after a small kind of seasonal break and seen FEED (front-end engineering design) studies and financial investment decisions around those projects, which were concept, just 12 months ago, turning into real projects. These are serious projects. They're not pipe stream. It starts to kind of find the delta between what was and what could be. And I'll just throw a few projects out there. In Saudi Arabia, you've got Neom, and that's a substantial part of the kingdom being turned into a substantial green hub. You've got Asian Renewable Energy Hub in Western Australia. You've got clients that we've got, such as Fortescue Industries, looking really to partner with the lights of JCB and Williams engineering — so Formula One Williams — to look at how to decarbonize really hard to decarbonize industries, such as mining. These are not small projects. These are multiple double digit gigawatt projects. And we've not seen that … we've not seen that in years. So this is entirely new. I would also just add that in terms of the finance instruments coming into this, what we have seen in just in this month is — in fact, yesterday — is Intercontinental Energy, which is based in Hong Kong, which we've been talking to for four or five years and working with as well ... they have just today attracted the Sovereign Wealth Fund of Singapore. This is serious money. This is absolutely serious, Nick. This is an absolute game changer.

Nick Easen

That's really interesting, Ben. You're kind of describing amazing real impetus for change at the moment. What I'm really interested in is how can we generate even further change. I think one way of phrasing it is, what are the unintended consequences if we get it wrong? Are companies and business and markets aware of any of these? What do you think, Ben?

Ben Sawford

It's a really tough question, actually, Nick, because getting it wrong … if you look at getting it wrong from a UK perspective ... I think the UK has done amazingly well at going through policy and decarbonizing its domestic agenda. That's kind of where we've sat for the last few years. If you get it wrong in terms of decarbonizing just your domestic and forget that, actually, you've got a massive, massive potential to export, that's where the unintended consequences are. This is a global opportunity and a global challenge. It's climate change. We all live under the same sky, therefore it is a climate change. Let's work it as a global problem. But let's also work it as a global opportunity. I think getting it wrong is probably around the balance of domestic and working the export capabilities.

We spoke a minute ago about Neom. Massive opportunity. We could be the Neom, and if we are not, then it probably puts us on the back foot. The shift for me, the shift of sands is quite evident. Power bases of energy supply and demand, they're kind of moving from the Middle East to Australia — I know the Middle East is absolutely, as I've just said, with Neom coming up. But you've got Russia, obviously with its gas. But South America — massive, massive renewable potential. Then you've got all of the parts that go into the supply chain. This is an area that me and the rest of my team and KBR is really involved in, is technology.

How does technology get involved with this? You've got emerging technology transition capability coming out of Canada, Norway, Korea and Japan. Now, Korea and Japan, you could probably accept they're very technologically advanced, but I've just said Canada and Norway. I mean, Canada from a technology point of view was Blackberry, right? It's not known for amazing technology advancements in terms of electrolizers, as it is in this particular instance. And same in Norway. I think the UK can be part of that. I think Northwest Europe can be part of that. But moreover, I think we have the potential to export our power. We've got the greatest wind resource on the planet. I've said that a few times in previous podcasts, but amazing wind power. Let's not just decarbonize our domestic supply chain and our domestic power, but let's decarbonize and let's actually put policy in place and financial instruments in place that we can actually sell and export our products around the world. That's what Neom were doing. That's what Australia's doing. That's what other parts of the world is going to do.

Nick Easen

Thanks. Thanks Ben, for giving us some amazing insight into that shift that you're seeing with energy. But it's not just about energy, right? There's also some big questions around resources as well, yeah?

Ben Sawford

The resource piece — and I think when people think of resources, they immediately go to oil and gas, and obviously with this, we're not talking about oil and gas, we're talking about electrons and the electron supply chain into our world, the world that we know — is entirely dominated actually by how do you turn those electrons into stuff. Turning it into stuff has massive consequences because the supply chain that goes in there — and this is something that really keeps me awake at night, and my team, and it's probably the future of many advisory firms — it's understanding what parts of that supply chain are critical and critical is with a capital C. It's what really matters. The criticality of minerals, the criticality of rare-earth elements. Some people listening to this might be, "What is Ben going on about?" but actually rare-earth elements — these are things that are only found in, I mean, most people would think, well, Tesla, lithium, Democratic Republic of Congo. All sorts of challenges there. Yes, and those are things that, actually, we are dealing with and we're working with from a sustainability point of view.

Actually, the key of this is understanding where can you get those rare-earth elements, those critical minerals, and how can you secure the supply chain? That supply chain isn't just in Africa, isn't just in Australia. It's places like Greenland. It's places like Chile. It's places like Argentina and Brazil. It's actually places like Cornwall, which is brilliant, right? It's brilliant for the UK economy. Places like Cornwall, where you have ex-tin mines, which has got waste products like lithium in the spoil. These products are critical. They're not just critical in terms of the overall supply chain. They're critical in terms of the recycling supply chain. You look at what Tesla is doing, in terms of looking at places like Southwest England, whether or not they can put together lithium mines, but also recycling of battery facilities. Great for the UK economy and great for any economy around the world.

For me, it isn't just about cheap electrons. It has to be about understanding the sovereign ownership of the entire supply chain and, therefore, both decentralized electricity but also the global sharing of resources and understanding of where those resources are, and not waste anything either, Nick.

Nick Easen

That's fascinating, Ben. I think you started there to paint a picture of what the future looks like. Could you expand on that for us and give us insight into what the future looks like if we get this energy transition right? What's the vision and how do you see it evolving over time?

Ben Sawford

It's a short-, medium- and long-term answer I'm probably going to try and give you. Forgive me. I guess the near term, it's an incredible mix. For me, it's decarbonizing. And it's not just for me, it's BP and it's Shell. You look at their future outlook on energy, this is talking to their annual report. It's decarbonizing heritage oil and gas projects. It's using existing supply centers. They will always prevail. This is something we've not necessarily touched on on this podcast — maybe on future podcasts we will — but it's a bold increase in nuclear power. We've seen that in a lot of publications over the last month or so in the beginning of 2022. It's in nuclear power, particularly with small modular reactors, nuclear power as a model for green energy production is absolutely critical. Then of course, as I've spoken about here, it's about power to X. It's about green energy carriers going into molecular form. And I, for one, because of the decentralized/centralized nature of the economies and policy, Australia and South America combined with the Middle East, and most of APAC are probably going to become the powerhouse in the next five years. Green ammonia — ammonia being an excellent hydrogen carrier and excellent energy carrier — that's going to be key. Green hydrogen will probably come through others and there'll be other energy carriers as well. I think though, medium term, the North Sea will become the center of excellence for a lot of the planet. And this is going to be repositioning our North Sea expertise. This is building out wind farms. This is building floating hydrogen production facilities. This is building floating ammonia production. This is a dramatic change, and you've got to get on the boat to understand it because there is an awful lot of change coming there. I think the likelihood is its liquid hydrogen, it's ammonia and its Northwest Europe is going to be really, really critical.

All of this is underway, and I was at COP26. My reflection on COP26 is that it was a one-off. And I say it was one-off, it was never reflected in the past COPs that I've been to. Going forward, hopefully it will be, but it actually brought together finance. It brought together government, it brought together business and it did obviously bring together the NGOs as well, but it wasn't NGO focused. It was actually business focused, and Kwasi (Kwarteng, UK Secretary of State for Business, Energy and Industrial Strategy), while he was there, I think that's probably why he was so tired as well, because he actually had businesspeople, he had the whole gambit of trying to bring this thing together.

So from my perspective, what I saw was all of the conversations were very authentic, policy driven around investment, bringing together opportunities and actually to deliver on the targets of COP26. I think the future is really bright. I don't think the future is green. I think it's actually, the future of the energy transition is economic benefit for all.

Nick Easen

That's really fascinating, Ben. It seems like you're really optimistic for the future, do you think?

Ben Sawford

Oh, without a doubt, Nick. The future, and despite the pessimism of all of the problems that we've had with COVID, this has actually brought about a huge amount of optimism in my market and certainly with the people that I've worked with, and with the investors. I'm having daily meetings with our clients in Southeast Asia and across APAC, and they are all looking for financial investment decision points this year. So really, really positive.

Nick Easen

Yeah, it sounds like really, really exciting times for the industry, Ben. And I just want to thank you, Ben, for joining the Global Energy Challenge podcast. It's been really insightful from my side, and thank you for your insight. And I look forward to talking with you about this again, so thank you.

Ben Sawford

Thanks mate. It's been an absolute pleasure as always.

TRANSITION

Lubna Salim

Wow, John, wasn't that super cool? I mean, I obviously know about these initiatives, but this is super exciting. And I just loved how Ben talked about the fact that the COVID-19 pandemic actually is accelerating the already accelerated energy transition, and that has brought about such a huge optimism in the market.

John Arnold

Yes, it's very reassuring to hear that there's reason for optimism. It was fascinating to hear about all of the factors that go into a successful energy transition, from the geopolitical to the economics, to the need for a global supply chain evolution.

Lubna Salim

Absolutely.

John Arnold

It's fascinating. And I can't wait to hear more about this in the coming weeks and months. For anyone that was interested in this episode, love to direct you to a blog that Ben has written called “Energy Transition Is Our Greatest Opportunity.” You can find that on the Insights and News section at kbr.com. Do a quick Google search for that, or just go directly to the site and find it. And looking forward to hearing the other episodes in this series. I believe that the next one is going to be specifically about the decarbonization of the nuclear industry.

Lubna Salim

Wow. So, exciting times ahead for all our listeners and us, because we equally enjoy these episodes and just to know what the future looks like.

John Arnold

Definitely.

Lubna Salim

So until then, stay safe, stay well and take very, very good care of yourselves. Bye.

John Arnold

Thanks everyone.