ADIPEC Energy Dialogues with Dr. Peter Terwiesch, President of Industrial Automation, ABB

Thank you, Gaurav.

We first of all see a lot of opportunity to contribute as a company with the competencies we've acquired and built over many years. And basically what we're seeing globally is an accelerated shift towards more electrification, both in industrial production processes more generally, but also in the context of our conversation here in the production and in the processing of hydrocarbons, as well as also with sustainability in mind, substituting where possible by renewable energies. And I think more than looking at technology roadmaps, this becomes very apparent if you look at the energy industries and the goals companies in the space have articulated. A lot of companies that have been known and famous as oil and gas companies really today are repositioning as energy companies. They are repositioning from producing only hydrocarbons to serving energy needs more broadly. If you think for instance of Shell, it was in a stated ambition of being the largest electricity producer in the world already by 2030 if I recall. And many of the other international oil companies that are now actually international energy companies have similarly bold ambitions. That's an exciting opportunity also for us from a business point of view because it combines the competencies we've built over the years in supporting the hydrocarbon industries with supporting the power generation as well as then the power consumption including power management in view of a potentially more volatile renewable energy component that is increasing in the mix. So we see a lot of opportunity in staying close to our customers and supporting them in the transitions that they're embarking on. And on our side, we've mirrored that also in actually merging our Oil, Gas and Chemicals as well as our Power Generation divisions into one that is now called Energy Industries. We did that one and a half years ago, closely listening to customers, and have gotten a lot of positive feedback on that.

It's definitely a trend towards increasing electric mobility, and at the same time we have to say it's horses for courses if you want to call it that. So not everything is solved with the same solution. If we look at kind of most immediately individual mobility — so the cars we would drive to get to work or wherever else we need to get to — then ABB started into charging and in particular the fast charging infrastructure, which is a key enabler. If you think of range anxiety, it's about how far can I get and how long will it take to recharge? ABB embarked on that about 10 years ago in a major way and is today leading in this space. And we can basically today already with the leading solutions charge for 200 kilometers of range in just eight minutes. So I think in terms of range anxiety, in many reasonably densely populated areas, the charging grid is growing to a point where that is very convenient together with the battery capacity that gives you more range. So for most practical applications in individual mobility, there's good progress. But it won't solve everything. There will still be applications where you need for instance top-up charging on the way. There will be applications where simply the energy density and the economics of storage for the time being will not be sufficient. So for instance, if you take the marine sector, on short haul, on ferry, we've basically already electrified ferry connections, for instance between Sweden and Denmark, that are entirely electrical. So basically they charge when the passengers off-board and board, during that time the vessel gets recharged. But for longer distances, instead for 30 years we've had hybrid electrical propulsion where you basically use the diesel engine to generate electricity, and then at a different RPM turn the propeller, and that construct gives you something like 15 to 20 percent of energy efficiency in typical applications plus other benefits. So it's also taken on very strongly in the 30 years since we first pioneered this solution.

I would definitely agree that differentiation is the answer here. There isn't a one size fits all. If you look at the power needs, if you look at the energy density constraints that are there, clearly electricity overall is gaining share. But electricity, of course, is not a source of energy, it's a carrier of energy. So basically that energy has to come from somewhere, and that can be hydrocarbon, it can be nuclear, it can be renewables, it can be geothermal. But electricity here is a conduit. And first of all, electricity is already a conduit to better efficiency in hybrid constellations like I was just describing for marine. And second, electricity is a way of actually building the optionality to integrate more renewables into the process. And that's also where electricity and automation go together very well because you are potentially dealing with more volatility in the generation. So a good process power management accompanying a higher share of renewables in a more electrified process is giving you the combination of efficiency, sustainability, and affordability that you look for when modernizing your equipment or when planning for new greenfields in view of the changing criteria.

Well, thank you first of all for summarizing it so well. And yes, indeed, we think it's a game changer. First of all, it's a game changer in the way it was developed because it actually was developed in a joint industry project together with our partners and customers Equinor, Total, and Chevron. So a lot of credit is due to our partners also. And what we've developed is basically enabling 30 years of subsea operation at 3000 meters of water depth with the parameters that you've described. Which first of all allows you to bring the loads close to the production, which of course is again an efficiency enabler. Second, allowing for remote unmanned production — obviously you wouldn't want to think of people at these kind of water depths. And we've learned an awful lot about also great spin-off ideas in terms of life cycle management, in terms of the continued journey towards autonomous operations. So beyond the game changer that subsea operation will be itself in the fields where it can make the difference between saving the cost for a topside and basically gaining efficiency, reducing CapEx by hundreds of millions potentially, we are confident that there's a lot of opportunity in here both for CapEx as well as for OpEx, as well as then these great spin-off innovations coming from it, as you often find when you look at pioneering technology developments — they have unintended positive spin-off consequences.

I think this is again not just the development but also the application is a matter of dialogue because it's always about a relative evaluation. So relative to other options of developing a field, here you have a new and initially unproven technology, proven only at the technology readiness level that we've jointly brought it to. So that's a process that I think for good reasons is a conservative process, a process where in dialogue you basically look at the relative economics of what it unlocks. And I'm confident that at the right time, we will see a field that wouldn't be economic without such a technology step and where we will then see this deployed definitely.

Look, there's the beauty of basically now 20 years of being the global number one in distributed control systems. We've seen the ups and we've seen the downs. So this isn't the first time we're running into a lower-for-longer kind of discussion, and it's always — and for good reason — it's serious because it's basically together with our customers unlocking the commercial viability of investments that could otherwise simply not be made. And the way we're contributing is of course in partnership with our customers to drive the initial cost, schedule, and risk elements down so that the CapEx becomes viable, but then also help them project the safety, energy efficiency, and productivity gains they will have in the operations phase. I think one thing that we're particularly proud of is our ability to integrate the electrification and the control of the electrical with the control of the process. If you think of anything from take a gas processing plant as an example, and imagine you have just a small disturbance as a voltage drop for a couple milliseconds on the power grid side, under normal circumstances you'd get a shutdown of the equipment. But here basically since we're able in milliseconds to also shed loads of different criticality, we're basically proud of the differentiation we have in terms of making plants more resilient in view of a more volatile electricity supply that they can have. And then of course the combination of combining technology on the one hand side with people who really understand the domain, that's also something that helps. And the rest is dialogue, dialogue about where can we rather than just having a tougher price negotiation in a tough environment, how can we together unlock much bigger potentials with our customers that are productivity advantages for them and for us teaming up together.

Well, first of all, indeed the COVID pandemic is a huge burden on society and on the customers that we serve, and also doesn't make our own operations any easier. But if you compare and imagine first that this would have happened to us 10 years ago, then basically 10 years ago was the means of the time. I think we'd be in a really tough spot, and the mobility constraints — people not able to get to critical places that need service capability and local competence — that could be a catastrophe. If we look how we're weathering the current storm with our customers, I think the developments that we've made in digitalization and in particular something that we call Collaborative Operations, where we connect not only the systems with each other but also connect the systems and the systems with the people and the people connected in parallel, and thus allow to basically provide expertise to a much greater extent remotely, so that you have somebody who can be local because he or she is outside but might not be exactly the expert that you need, and now by connecting the systems and the people you basically supply the remaining expertise over a distance by digital means. And that can be by the use of augmented reality, other times it's just an audio connection with a live connection into a system. But the fact that we've developed a very strong Collaborative Operations offering initially supporting customers in the marine industry — if you think of the crew out at sea on a vessel, they're quite remote from anyone you could bring in to help, and of course they need to master critical situations or they also need to look after efficiency gains as they operate — that's basically a technology where we already have about a thousand marine vessels that we're supporting. And from there, even before the pandemic actually, we've already extended that to hundreds of industrial sites that we're also supporting in this way. And I think digitalization in general and this Collaborative Operations approach where you connect systems and people for collaboration over distance — that's something that I don't think we will see swinging back to as much travel as before. Travel and connecting people and some on-site work is still needed, but I think technology has taken a step forward, and I think that step forward is something that will stay with us.

Well, I think there's a rethink going on already in multiple dimensions. And the different angles of rethink are clearly: there's an energy transition going on like we started the conversation with. Oil and gas producers are becoming energy companies more broadly, including renewables, for some of them going all the way to end customers outside liquid fuels. So the energy change is going on. Second, I think with digitalization, yes we're bridging distances, but we're also seeing a convergence of the operational technologies, the engineering technologies, the IT, for greater productivity advantages. Basically after a long period of defining productivity as in some way the number of input-output signals a single operator could handle, always in the OT space, it's basically reached a point where working across functions gives productivity advantages. So I think there's a lot of changes going on in the industry, and we're quite proud to participate in all of them.

I think there's a continued benefit of combining electrification, automation, and digitalization, and emerging and evolving opportunities out of those together. That's something we do for a broad range of industries, but in particular also the energy industries, the newly converged energy industries I should say, where we're building on decades of domain expertise but also the advantages and the synergies you can drive out of combining electrification, automation, and digitalization. Just think for instance of unplanned shutdowns in the energy industries. What customers are typically telling us is that human error, rotating machinery, and power outages tend to be among the top causes of unplanned shutdowns. And our analysis and collaboration with customers suggest that about 80% of that you can mitigate, and it's through a combination of working the electrification, the automation, and the digitalization that you can have a go at those 80%. So that's savings on the operation side very clearly. But you can also use those same synergies between dimensions to bring down the cost, schedule, and risk of the capital investment project. So in a time when making your projects economically work, getting them over the hurdle, here's something that we can also contribute in a great way. And so I have to say as a manager and as an engineer, I'm really excited about the opportunities we have out of the technology pace, out of the changes our customers are asking us to make with them. So there's a lot of opportunity also in challenging times that together with our customers we will master.

Thank you, Gaurav. Thank you all for watching and listening. For more details, go to ADIPEC.com.