Low-carbon oil seems pivotal to the future of fossil fuel production as it becomes clear that the world is still highly dependent on crude. Working to fill the gap left by Russia, countries and oil firms around the world are increasing their oil production and long-term output plans. But to achieve ambitious carbon emissions promises, low-carbon oil will be necessary. Several international oil majors have announced plans to shift their fossil fuel production to low-carbon oil, alongside natural gas, in the coming years as they strive to reduce carbon emissions without giving up on crude. Most of these low-carbon promises are based on new operations in regions with recent discoveries of huge reserves such as the Caribbean and Africa. Many are abandoning existing operations in countries with dwindling oil reserves in favor of new areas, where they can establish low-carbon production methods and incorporate carbon capture technology.
In April, Equinor announced plans to electrify offshore operations to produce low-carbon oil. It stated that the average offshore oil output produced around 15kg of carbon emissions per barrel in 2021. However, Equinor claims it can reduce its current 7kg of CO2 per barrel to just 6kg by 2030 by using electrification methods.
In its Johan Sverdrup field in western Norway, Equinor has constructed a cable to connect to the national power grid. The energy firm now has plans to lay another cable to electrify the field further as it expands, connecting oil platforms across the region to transmit power over long distances. It could eventually link to other oil fields in the region to dramatically reduce carbon emissions across its operations.
In Canada, President Trudeau is continually reiterating the government’s climate change promises while refusing to give up on oil. While this may seem contradictory to many, Canadian politicians insist that low-carbon oil production can be compatible with the country’s ambitious climate pledges. This could be particularly important as the world looks to Canada to fill the gap left in the market due to sanctions on Russia dramatically cutting the world’s oil supply.
In March, Canada achieved a record $13.6 billion from oil, natural gas, coal, and refined petroleum exports, supporting the country’s aim to maintain its fossil fuel output. Trudeau’s policy ambitions appear to have shifted in recent months in favor of a slow phase-out of fossil fuels, aiming to decarbonize the oil and gas industry instead of stopping production. At present, the Canadian government is aiming for a carbon emissions reduction of 42 percent in the oil and gas industry by 2030.
Environment Minister Steven Guilbeault stated at a parliamentary committee meeting this month, “Low-carbon oil is not a myth, it’s not an invention.” Suggesting the world will continue to need oil to meet its growing energy demands, and that it should at least be low-carbon oil that will still help to reduce the current level of carbon emissions.
Related: Brent Hits $113 As Oil Heads For Second Weekly Gain
Oil firms around the world have dramatically increased their investment in low-carbon oil operations over the last year in response to International Energy Agency and national governments' aims to cut global carbon emissions to net zero by 2050. According to Offshore Energies UK (OEUK), energy companies are planning to invest almost $309 billion in low-carbon energy projects in the U.K. by the end of the decade. As well as renewable energy projects, this will also contribute to the introduction of several carbon capture technologies across oil and gas operations.
With oil and gas majors announcing their Q1 earnings this month, many thank their low-carbon operations for their continued profits. BP stated that it boosted production by launching several new projects in 2021 in its 'gas & low carbon' unit. Last year, Chevron announced a $300 million in low-carbon technologies, which it expects will support the longevity of its oil operations. Exxon announced $3 billion in carbon capture technologies (CCS) and American firm Occidental Petroleum said CCS is the core component aim of net-zero emissions by 2050.
However, the push for the introduction of low-carbon oil technologies by major energy firms hasn’t stopped many from accusing Big Oil of continuing to greenwash with big carbon-cutting promises. ClientEarth argues that while Shell says it will use “lower-carbon energy products to reduce GHG emissions”, it still plans to increase its fossil fuel business by 20 percent by 2030. Growing its operations, ClientEarth disputes, will inevitably be detrimental to the environment, suggesting that Shell and other major oil firms are overstating their low-carbon promises.
As the world demand for oil continues to increase, more low-carbon oil operations will be developed to meet governmental and energy firm climate promises without giving up on crude. While some suggest this is not a positive contributor to the clean energy transition, the continued reliance on fossil fuels worldwide means it may be a necessary evil.
ADVERTISEMENT
By Felicity Bradstock for Oilprice.com
More Top Reads From Oilprice.com:
- The U.S. Shale Patch Is Facing A Plethora Of Problems
- Europe May Lose The Energy Transition Race Before It Really Begins
- Upstream Oil Industry To See Highest Profits Ever In 2022
Moreover, International Oil Companies (IOCs) don’t have the luxury of shifting their fossil fuel production to low-carbon oil first because of declining global oil discovery rates and second because or resurgent resource nationalism.
Top IOCs such as Total, BP, Shell, Chevron, ENI, ConocoPhillips, ExxonMobil, Equinore and Repsol have reserves estimated to last under 10 years. Between 1998 and 2002, top IOCs replaced 99.7% of oil produced. This declined to 51.7% between 2003 and 2007. Overall average IOCs’ reserves in place have fallen by 25% since 2015 with less than 10 years of total annual production available. For instance, oil supermajor Shell expects to have produced 75% of its current proven oil and gas reserves by 2030, and only around 3% after 2040.
Resource nationalism has been on the rise around the world underpinned by governments wanting to fully control whatever hydrocarbon and mineral resources they have in order to maximize their revenues, growing global demand for these resources and also growing influence of the National Oil Companies (NOCs). That is why resource nationalism has become a major existential threat for the IOCs.
Oil and natural gas will continue to drive the global economy throughout the 21st century and probably far beyond.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London