Ever since the first major oil fields were discovered at the start of the 20th century, the world has been on a never-ending hunt to see where else black gold might be hiding. Monetizing seepage areas goes back even further. But with global oil demand having dissipated on account of the pandemic, there’s little reason to spend cash on additional procurement.
Combine that with the green movement doing everything it can to convince governments there’s only one ethical way to handle energy, and we’re likely to be moving into an era where fossil fuels sell for less but cost more to harvest/utilize thanks to carbon emission regulations.
This has left oil companies pondering the true value of seeking new sources of oil, with some having already decided there’s no point.
Earlier this month, BP said it no longer had any interest in conducting exploratory surveys in new countries. It has what it needs for the foreseeable future, noting that pricing had become unstintingly low as swaths of the industry finds itself having to pay just to find someone to take surplus product off its hands. Meanwhile, oil-producing nations have cut output by record levels this year to curb their bloated supply and reduce worldwide inventories. The Organization of the Petroleum Exporting Countries (OPEC+) recently eased agreed-upon cuts to 7.7 million barrels per day (bpd) from 9.7 million bpd.
Rystad Energy AS expects roughly 10 percent of the world’s recoverable oil resources (representing around 125 billion barrels) to become obsolete in the near future. Using the Falkland Islands as an example, Bloomberg attempted to explain the ramifications in a recent report. Despite holding a sizable and mostly untapped oil reserve, the South Atlantic region won’t see any of its previously planned rigs going up.
From Bloomberg:
Larger companies have also begun voicing that realization for other projects. BP said in June it would evaluate its portfolio of discoveries and leave some undeveloped. Chief of Staff Dominic Emery already hinted last year at what kind of resources might never “see the light of day.” Complicated projects could be shelved in favor of fields that are quicker to develop, such as U.S. shale, he said.
The pressure to curb emissions may also prompt companies to leave the most carbon-intensive reserves in the ground, as France’s Total SE acknowledged last month when it took an $8 billion writedown on carbon-heavy assets.
The list of projects most at risk includes deepwater discoveries off Brazil, Angola and in the Gulf of Mexico, said Parul Chopra, vice president for upstream research at Rystad. Canadian oil-sands projects such as the expansion of the Sunrise development in Alberta are also in doubt, he said.
While this may be a triumph for ecosystems in underdeveloped parts of the world, anywhere that has easy access to oil and doesn’t need additional refinement processes should be sitting pretty. Of course, it’s difficult to predict what will happen in the long run — especially with most oil production firms seeking to transition into energy companies with a greener public persona. Contributing factors include how we count carbon emissions in terms of oil procurement and refining, as well as how successfully national grids can be bolstered for the presumed influx of electric vehicles (and a higher reliance on renewable forms of energy).
That’s assuming non-fossil fuels are even capable of providing the amount of energy the world needs to keep humming, however.
[Image: Maksim Safaniuk/Shutterstock]
