At the London EAGE* earlier this year, cognitive dissonance was the order of the day. Moving from the plenary sessions (which we duly report elsewhere in this issue) into the exhibition area we heard one group of explorations geophysicists (for that is what the EAGE is) discussing the threat of global warming, to the world, and to the oil and gas industry, while another group (the exhibitors) carried on with their usual business of oil and gas exploration. While wondering how to editorialize on the above, I read Malcom McBarnett’s piece in First Break, and thought that I would just point you in his direction where you can read his take on the ‘uncertain future’ of the industry and the ‘impossible dilemma’ that faces oil companies.
Since the EAGE, industry sentiment appears to be swinging steadily towards the need to address (or at least pay lip service to) the carbon issue. An SPE-backed event in France, the Gaia Summit, asked the question ‘Is the oil and gas industry on the right side of history?’ What did they come up with? A cute diagram and a photo-op laden Twitter feed where SPE president Sami Alnuaim effused that the group was ‘setting the stage for the oil and gas industry to claim the pride and show the responsibility of what we do: energizing the world, improving people’s lives, leading social development and protecting the planet’. The Summit does not appear to have published its findings but fortunately, Gaffney Cline was there in the person of Nigel Jenvey who reported that** …
The oil and gas industry are participants in a global energy system that is already transitioning to be lower carbon, and we need to be considerate and responsive to what society needs and wants. There is no silver bullet to achieving this. It will require carbon management and the scale-up of every low-carbon option, including […] carbon capture, use and storage (CCUS) [and] will be the backbone of our future industry.
In my 2017 editorial, COP23 BECCS, FECCS and the future of fossil fuel, I doubted whether the world would ever be prepared to pay the cost of CCS. Sitting in on Philip Ringrose’s presentation at EAGE I was puzzled as to how he got to such a relatively positive economic take for CCS. In 2017, I concluded that infrastructure costs made it unlikely that the world would ever be prepared to pay the price. In an email exchange, Ringrose kindly responded to my points (see below). Given that CCS is the only way forward for low carbon fossil fuel energy production, it is interesting to imagine what kind of plays would support the extra cost of CCS.
But first, some more bad news for oil and gas from the green energy movement. McKinsey’s Insights has it that ‘by 2030, new build renewables will be out-compete existing fossil fuel generation on energy cost in most countries – a key ‘tipping point’ in the energy transition’. Most countries will reach this tipping point before 2025.
So, oil and gas will be squeezed, between cheaper, green energy and the extra cost of climate-saving CCS. This means that only the very cheap resources will survive. What will the cheap fossils be? Well they won’t be the oil sands. Shale/unconventionals will be squeezed even more than they are squeezed today. Which leaves us with coal, although that may seem surprising, Middle East oil and other cheap oil and gas. In which context, back to the EAGE where WoodMac’s Neil Anderson mentioned twice the ‘really low cost’ of ExxonMobil’s Guyana discoveries which are conventional deep-water oil finds. So, there you have it, a glimmer of hope for the geophysicists. Tempered perhaps by the way the seismic business is going ‘asset light’ with Schlumberger selling its vessels last year and now CGG!
* EU Association of geoscientists and engineers. Previously the EU Association of exploration geophysicists.
** More in the June 21 Gaffney Cline Insights.
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