Extreme weather events resulting from the changing climate are threatening some 40 percent of the world’s recoverable oil and gas reserves, risk consultancy Verisk Maplecroft has said in a new report.
The portion is equal to some 600 billion barrels of oil equivalent, the report’s authors also said. Some 10.5 percent of the global recoverable oil and gas reserves are located in places that were rated as extremely risky under the consultancy’s Climate Change Exposure Indices, while the other 29.5 percent were rated as highly risky.
Among the events listed in the report are storms and floods, rising sea levels, and extreme temperatures.
According to Verisk Maplecroft, OPEC members Saudi Arabia, Nigeria, and Iraq are among the most vulnerable to these events. The Kingdom is under increased threat from droughts, sand storms, and extremely high temperatures, the authors noted. Together, these three countries account for almost a fifth of the world’s recoverable oil and gas reserves.
The worse news is that the adverse effects have already begun to manifest, according to the authors of the report. The Texas Freeze from February this year and Hurricane Ida were among the examples.
The Texas Freeze wrought havoc on the Texas oil and gas industry and left millions without power and heat, while Hurricane Ida caused a record 55 spills in the Gulf of Mexico, production outages, and outages in the refining industry on the Gulf Coast.
“These types of events?are going to become more frequent and more extreme, creating even greater shocks within the industry,” the report’s authors said. “But Identifying and disclosing these risks in line with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations is now a strategic necessity for energy companies if they are to mitigate these threats and offset?investor concerns over their transition to a low carbon future.”
By Irina Slav for Oilprice.com
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No matter how extreme weather conditions could get as a result of climate change, they won’t be worse than the Arctic. And yet, it is the Arctic where Russia is tapping into reserves of oil and gas estimated at 125 billion barrels (bb) of oil and 3004-3534 trillion cubic feet (tcf) of gas. If these are added to Russia’s current proven reserves of oil and gas, the figures then mushroom to 233 bb of oil and 4324-4854 tcf lasting from 1-2 centuries. In fact, climate change will be aiding Russia in transporting these reserves to world markets via the North Arctic Route (NAR) from 2024 onwards.
As for Saudi Arabia, droughts, sand storms and extremely high temperatures are second nature to it and no climate change events could make it worse. So the oil and gas reserves of Saudi Arabia won’t be affected at all from climate change conditions.
Like Saudi Arabia, Iraq’s weather conditions would hardly change with climate change. Therefore, there could never be any additional impact on the country and its huge oil and gas reserves. Iraq sits on the world’s largest oil reserves estimated to exceed 400 billion barrels (bb) of oil between proven and semi-proven reserves according to international experts who assessed Iraq’s oil potential. Moreover, Iraq has the cheapest production costs in the world estimated at $2-$3 a barrel. Furthermore, only 70% of Iraq’s territory has been explored for oil. Based on its potential, Iraq could be expected to supply the global oil market with 12-13 million barrels a day (mbd) in the next two decade and will most probably be producing the very last oil barrel in the world.
Texas isn’t a stranger to hurricanes and tornadoes. And while climate change may have caused the Texas freeze, it was the effect of the freeze on dilapidated infrastructure that wrought havoc on the Texas oil and gas industry.
The last barrels of oil produced in the world will come from the Arab Gulf region, Venezuela and Russia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London