Emerging economies must continue to rely on fossil fuels while demand is high, largely ignoring the developed world’s green transition and taking this opportunity to develop their economies and boost employment figures around cheaper oil production than developed states can now offer. As long as prices and demand remain high, emerging economies will continue oil and gas production as oil majors pursue low-cost oil projects across Latin America, the Caribbean and Africa, while North America and Europe begin the transition away from fossil fuels towards renewable alternatives in a bid to respond to international pressure on climate change.
The Offshore Technology Conference held this month in Houston highlighted the potential of several newcomers to oil and gas. Brazil, Ghana, Guyana, and Suriname, to name a few, presented strategies to increase oil and gas output over the next decade, following significant discoveries in recent years.
The first oil technology conference to be held in the U.S. since the pandemic showed that the face of oil and gas has changed significantly, as demand and oil prices have fluctuated dramatically over the last year and a half, and several governments from around the world have finally responded to calls for net-zero carbon emissions and greater action on climate change.
This has driven several well-established oil states in the developed world to set out low-carbon oil and gas plans as well as to develop several longer-term renewable energy projects. In the meantime, discoveries in non-traditional oil regions look set to add value to several emerging economies.
Matthew Opoku Prempeh, Ghana’s Energy Minister explained at the conference, “We have millions of people without electricity in Africa,” therefore, “Energy transition does not mean we'll see our resources unexploited.” This sentiment was echoed by the vice president of Guyana, Bharrat Jagdeo, who stated “We have been called to leave our oil in the ground. We believe that's totally unfair.” “Being a small country, we will not have the capacity and the framework for an optimum operation of the oil industry right now, but we will continue improving.”
Carbon capture and storage (CCS) technologies and grey hydrogen projects also had their place in the conference, as governments and oil majors around the world hope to make oil and gas production less carbon-intensive rather than giving it up completely, as most renewable alternatives are still underdeveloped.
Emerging economies now wishing to develop their oil and gas industries can enter into development with the knowledge that oil-rich states previously lacked, the ability to create low-carbon fossil fuel projects that can also support the development of renewable energy while bridging the gap to a complete transition.
One such state is Brazil. Veronica Coelho, Brazil chief for Norway's Equinor, stated the potential for low-carbon developments in the country, "What is necessary is that we make sure that we produce the energy the society needs with a responsible attitude."
Brazil plans to further develop its already strong pre-salt oil industry, with new discoveries offering the potential for low-carbon oil production within the next five to ten years. This shows Brazil’s dedication to fossil fuel in a time when several governments are moving away from new long-term developments.
In fact, Brazil has the potential to be producing a quarter of the world’s offshore oil within the next four years. After having sustained its oil production levels throughout the pandemic, Brazil hopes to double its oil output by 2030, as oil majors invest heavily in the country’s pre-salt oil industry.
With several new oil discoveries across Latin America, the Caribbean, and Africa now being developed, experts highlight the ongoing demand for oil in countries with rapidly growing populations, particularly in Asia, which is expected to account for around 90 percent of global oil demand growth through 2025.
An article in Al Jazeera from earlier this year highlighted the $300 billion a year spent on maintaining low fossil-fuel prices, to stave off civil unrest and prop up their economies. As many developing countries continue their efforts to recover from pandemic-related economic challenges, struggling with unemployment, inflation, and poverty, industries relying on fossil fuels to survive and low gasoline prices for the public are key concerns for governments.
The Purdue University’s Center for Global Trade Analysis suggests that allowing the market to dictate fuel prices would reduce global greenhouse gas emissions by up to 3.2% by 2030. However, after decades of fossil fuel reliance driven by the developed world, allowing countries in North America and Europe to grow their economies throughout the black gold boom and beyond, a sudden movement away from fossil fuels while demand is still there, as well as a laissez-faire approach to rising oil prices, would be highly hypocritical.
Restricting oil production in developing economies that have been overexploited by the Western world for centuries should not be taken lightly. The better alternative may be to encourage and invest in the low-carbon production of much-needed low-cost oil and gas, which can be built to support the development of renewable energy projects in the future.
By Felicity Bradstock for Oilprice.com
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