Consultant: Carbon Dioxide Emission - Don't Blame Oil, Gas Companies
Oil and gas producers have not hurt the environment through carbon dioxide (CO2) emissions as much as the processing and transportation industries as well as petroleum products consumers, an industry veteran said.
“The big emitter of CO2 are the users of petroleum products and the demand is not decreasing despite the economic slowdown in some markets,” Peter Cockcroft, an independent energy and risk management consultant who has led a number of oil and gas firms during his 40 years in the energy industry told Rigzone.
“Oil and gas companies are unfairly under regulatory and reputation pressure to reduce both upstream and downstream CO2 emissions. But these companies continue to take a leading role in identifying and implementing energy efficiency programs,” he pointed out.
Cockcroft questioned the lesser pressure on petroleum product consumers who generated around 50 percent of global CO2 emissions and observed the high level of CO2 emitted by plants converting biofuels through “pressured” processes including palm oil refineries.
Upstream Firms Focus on Existing Fields
Meanwhile, the consultant noted efforts made by upstream companies in meeting rising global energy demand through hydrocarbon exploitation despite the drastic decline in oil prices which has adversely impacted their bottomlines.
Cockcroft said oil and gas companies are focusing on maximizing production from existing fields through innovation and cost effective means, adding that wildcat drillings resulting in dry holes have not been reported much these days.
Still, major petroleum firms have slashed upstream capital expenditure by 60 to 70 percent this year because of low oil prices. Meanwhile national oil companies are focusing on marginal and existing fields and continued drilling within proven hydrocarbon basins.
It has become attractive to continue drilling in existing fields as charter rates for jackups have fallen by more than 50 percent, while services companies including seismic surveyors have dropped fees significantly.
Cockcroft sees reserves building in marginal fields through new ideas, technologically-enhanced and cost-effective operations. Technologies would also help develop the previously non-commercial discoveries in shallow waters and onshore basins.
Low oil prices means higher consumption, especially in the transportation sector. He noted that share prices of airline companies have risen on stock exchanges as fuel costs – a key operating component – have fallen in line with the industry downtrend. Comparatively, the oil and gas firms are losing their values with declining share prices on the same bourses.
Yet it is these oil and gas companies that are supporting the global economies by continuing with their exploration and production activities.
Cockcroft said national oil companies have obligations to their governments to keep producing from existing hydrocarbon basins even on smaller profit margins, while supermajors have had to rethink about costs and responsibilities to the shareholders.
Markets are not going to change in any way with oil and gas fed energy to stay on in the coming years and renewables having again lost the advantage of being developed. Natural gas is favored for its pricing and increasing availability.
Cockcroft noted that Japan has switched to environment-friendly natural gas to replace nuclear energy, while more Asian countries are also opting for the more carbon-friendly fossil fuel as imports of liquefied natural gas become cheaper.
Hope for Change in Fossil Fuel Dependence
But there are industry experts holding on to the hope of changing the fossil fuel dominated energy businesses.
“Hydrocarbons have been exploited to satisfy the energy needs of the world, as these were the easiest, therefore the most economical to exploit, ever since we discovered Texas Tea and Black Gold, among others,” according to Professor Michael Quah, director of the National University of Singapore’s Energy Office and an industry watcher, in particular its transition from fossil fuels to a low carbon future.
“For over 1,000 years the world continued to improve upon the machines and systems to utilize these resources. Only recently have we woken up to the ‘externalities’, the carbon burden on the atmosphere,” he pointed out.
“However, breaking our dependence on fossil fuels incurs extra current costs and we have to move to life-cycle analyses,” Dr. Quah explained.
He added that the bankers of the world are reluctant to do that and there’s a resistance to shift to renewable resources, where some countries are blessed with more and other less.”
“We continue to use fossil resources because we cannot simply go cold turkey,” Dr. Quah continued, unless “we wish to suffer rapid withdrawal symptoms”.
The academic explained that energy is so fundamental to human development that the world must accelerate the transition away from fossil fuels at great costs, more so for the lesser developed countries. But Dr. Quah emphasized that “we must not expect an immediate turnaround, as “our species cannot make such U-turns without a deadly whiplash”.
Ken Hickson, head of the consultancy Sustain Ability Showcase Asia (SASA), added there is no time to lose in making the vital switch from fossil fuels to renewable energy.
“Oil, gas and coal companies must have seen the writing on the wall when more than 30 years ago strong scientific evidence started to surface that burning fossil fuels was the primary producer of unacceptable levels of CO2 in the atmosphere,” Hickson, author of “Race for Sustainability” and “The ABC of Carbon”, said.
“A head-in-the sand attitude by the oil industry and, in some cases, outright denial of climate change and what was fuelling it, has finally led to pressure being put on the big producers to mend their ways”, Hickson observed.
He even draws attention to his belief, outlined in his global “Visions 2100” launched in Paris recently, calling for international agreements to shut down all coal mining and coal fired power stations by 2030 and that that major oil companies, including the Middle East oil producers, should invest 80 percent of their profits in renewable energy in 2016.
Despite the recent Climate Change meeting in Paris, developing countries are unlikely to heed the developed world’s call to stop using fossil fuels as current crude oil and petroleum products prices are sufficiently low for them to tap on such fuel sources in developing their national economies, according to industry experts and energy analysts.
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