Two recent reports warned that oil and gas production needs to be significantly reduced if the world is to meet the Paris Agreement goals and curb the effects of climate change. They add to a growing body of research calling on Big Oil to stop pumping. But Big Oil seems to be doing the opposite.
At the beginning of September, Italy's Eni—one of the most ambitious oil majors when it comes to emission reduction commitments—announced a new oil discovery offshore Ivory Coast. The company estimated the potential reserves of the new discovery at between .5 billion and 2 billion barrels of crude and 1.8-2.4 trillion cubic feet of natural gas.
Last week, Exxon reported yet another discovery off the coast of Guyana - its twentieth in the Stabroek block. It adds to reserves already estimated at 9 billion barrels of crude, which the Guyanese government plans to exploit to the best of its abilities.
Meanwhile, a report from University College London has warned that the oil industry must start cutting production at a rate of 3 percent annually by 2050 to meet the 1.5-degree Celsius target of the Paris Agreement, which is the more ambitious scenario of the agreement. This, according to the researchers led by environmental and energy economist Dan Welsby, means some 60 percent of global oil reserves, along with 90 percent of coal reserves, need to remain in the ground.
Another report, by Carbon Tracker, calls on oil companies to plan for a future where demand will be much lower. So much lower, in fact, that they needed to plan for 50-percent lower output over the next decade or so if they really want to take part in efforts to curb the rise of global temperatures to 1.5 degrees Celsius above pre-industrial times.
"Oil and gas companies are betting against the success of global efforts to tackle climate change," one of the authors of the report, Carbon Tracker's head of oil, gas, and mining, Mike Coffin, said. He couldn't have put it better, and while it is not news that the interests of the oil and gas industry are at odds with a lot of climate change efforts, there is more than one reason for this. Related: The Top Two Commodities To Watch In The Short Term
Consider another recent news report. Canada's Enbridge paid $3 billion for Moda Midstream Operating, a company that owns the biggest oil export terminal in the United States, the Ingleside Energy Center in Corpus Christi, Texas, to be renamed Enbridge Ingleside Energy Center (EIEC).
"EIEC's highly advantaged outer harbor location, with direct connection to low-cost, long-lived supply, combined with VLCC capability and rapid loading rates, position it as one of the most competitive export facilities globally," Enbridge said.
The deal comes at a time when the United States is making a mad rush for climate change legislation to catch up with Europe, and this rush is largely unfavorable for the oil industry. And yet, Enbridge is betting big on the continued demand for U.S. oil globally.
The reason: oil demand outlook.
Oil demand, which stunned the energy world last year, sending Big Oil reeling and many small companies sinking, is back with a vengeance, exceeding all expectations, some of which predicted that the shift to renewables would kill oil demand growth pretty soon. It now appears these predictions were premature.
It is because of this demand outlook that Big Oil is risking, as the Carbon Trackers report notes, up to a trillion dollars worth of oil and gas projects that will not be competitive in a low-carbon world. Because this low-carbon world is quite uncertain, even with all the legislation and the support of asset managers with trillions of dollars in assets.
Last week, record-high gas prices and low wind speeds, which together served as an unpleasant surprise for the UK grid, forced National Grid ESO to fire up a coal plant. The portion of energy the plant supplied was minuscule, at 3 percent, but the fact remains that one of the most ambitious emission cutters in the world was forced to resort to dirty coal because less dirty gas was too expensive, and green wind fell too short because of the weather. Related: Iraq Secures New Investments In Its Booming Oil Industry
Meanwhile, the same record-high gas prices and low wind speeds are causing protests in parts of Europe as electricity bills swell. With gas, it's about a shortage that was the result of a rare combination of events, including a prolonged winter and a strong rebound in economic activity in Asia, which has been gobbling up more LNG cargos. With wind, it's the weather. It may well be the case that Big Oil continues with its business as usual in anticipation of more such discrepancies between energy demand and supply.
ADVERTISEMENT
French TotalEnergies, the latest oil major to rebrand itself away from its core business, earlier this month announced a $27-billion investment in Iraq over the next 15 years. The money will go towards boosting the rate of oil recovery at several southern fields, reducing gas flaring to use the gas for local power generation, and building a solar farm. Some might call this greenwashing. Others would call it hard cold reality, where people need energy, and getting it on a consistent, reliable basis trumps its emission footprint.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- Record-Breaking Energy Prices Could Soar Even Higher In Europe
- Auto Giants Slash Production As Chip Shortage Worsens
- Hurricanes Raise Risk Of Oil Spills In Gulf Of Mexico
Oil priced above that is not worth buying in the least at the moment if you're a refiner along the border with Canada as North Dakota is.
Obviously Tesla needs to go all in on a massive Supercharger all electric everything in North Dakota just on real estate valuations alone in that State.
So does Rivian as well.
For both this is even more true in Ohio and Florida.
The excessive pressure by the environmental activists, the divestment campaigners and the hapless IEA to ditch oil will amount to zero.
Moreover, oil and gas will continue to be the core business of the global oil industry as long as there is global demand for them. Despite trying to greenwash itself which doesn’t fool anybody, the global oil industry will continue to invest heavily in oil and gas and to a lesser extent in renewables.
Environmental science is not an exact science yet. It is currently based far less on real science and far more on bias against fossil fuels, dogma, vested interests and political leanings. It has yet to establish unequivocally whether climate change was caused by human beings alone using fossil fuels or as a result of natural developments or both.
The alarmism the environmentalists have propagated over the past three decades and also misleading the public about the imminent existential threat of climate change are yet to be corroborated and confirmed by true science.
The litigation game against the producers of fossil fuels is based upon a false premise, namely that fossil-fuel producers should be held responsible for the effects of increasing atmospheric concentrations of greenhouse gases (GHG).
Producers produce fossil fuels not for the fun of it but obviously because there is a global demand for them. So why have the courts failed to go after every industry that uses fossil fuels? Should the courts not sue consumers of fossil fuels for the purported harm that their consumption preferences engender? Still the courts are happy to blame fossil-fuel producers for all that damage. Assigning “blame” to the producers of fossil fuels rather than the users is an obvious gambit to make the litigation game manageable; they cannot sue everyone but they can still show hypocrisy.
The most sensible and efficient way to combat climate change is to focus on reducing carbon emissions from fossil fuels and not their actual use.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
In the 1930s the Fischer-Tropsch process was created, allowing the creation of hydrocarbon fuels from feed stocks and energy (electricity). However, it took far more energy (as measured in barrels of oil) to produce a gallon of fuel than to simply produce the fuels from petroleum.
About 8 years ago, the Navy patented a process based on Fischer-Tropsch to produce clean burning carbon-neutral jet fuel from seawater and electricity. Their goal was not specifically to make CHEAPER fuel, but rather to allow a nuclear carrier to produce all the fuel needed by its fighters and support ships for extended times at sea. Their process suggests the primary cost overall is the cost of electricity - which, from a carrier's nuclear reactor, runs considerably more than energy from our grid today. At that time, they estimated a cost between $3-6 per gallon to produce jet fuel/diesel fuel.
Last year, they developed a catalyst which substantially (they are coy on numbers) reduced the cost to produce the fuels. Presuming the old catalyst was "a consumable" and made of expensive materials such as platinum, it's reasonable to think that that has "mostly" eliminated the second biggest expense in the process.
So, what is coming? For 70 years the price of solar panels (or their equivalent) have been dropping in price exponentially - so much so that today the panels themselves constitute a small fraction of the total cost of installed utility scale solar. However, commercial solar today is only about 20% efficient. Doubling that efficiency would reduce total installation by nearly half (some components don't "scale," such as inverters). It seems very likely that 45% is achievable, and if something like NovaSolix succeeds even 80% is not unachievable.
Whether it is solar, wind, or somebody invents Mr. Fusion and sells it at Costco for $49.95, the race is on. SOMEONE will find a way to produce electricity at a price that dooms petroleum.
Once you include fugative emissions methane is at best a tie.
But then you make your living hyping the death of the natural world