Efforts to reduce carbon emission by gradually phasing out oil use mean that fields with bigger price tags, like the planned Cambo off the coast of Scotland, should not go ahead, according to financial think tank Carbon Tracker.
“The world has a great many existing oil projects that are lower cost and lower risk than Cambo and that are ahead in the financial pecking order,” according to Carbon Tracker founder and executive chairman Mark Campanale. “The IEA has said that ‘no new oil, coal or gas is needed’ in a 1.5°C scenario and Cambo is blatantly one of those projects.”
World leaders are currently convening in Glasgow, Scotland at the COP26 summit to define carbon reduction goals to mitigate climate change. The main thrust of that will be moving transport and industry to run on non-hydrocarbon resources. This will take decades, and the heart of the process will involve an orderly and efficient switch in future investment flows.
Projected output from fields that already produce or are in development amounts to an average of some 69 million barrels a day globally over the next two decades, Carbon Tracker said.
In the sustainable development scenario, there’s room for an average of 5 million barrels a day worth of additional oil fields worldwide, according to the report. Cambo, however, would only be needed if the required amount of new oil was twice that, pushing supply further up the cost curve. That size of output would take the world well beyond climate targets.
The sustainable development scenario, in which temperature increases by less than 1.65 degrees Celsius, sees development for oil projects which can succeed economically at or under around $30 a barrel oil, according to the report.
The idea in energy transition is that renewable energy resources like wind and solar will eventually replace oil and gas. Renewable energy resources already represent a profitable economic opportunity in certain countries, according to Carbon Tracker.
The issue of cost is complicated by unevenly distributed oil and gas resources globally. Cost and complexity in the North Sea are mainly related to weather and geology. Meanwhile, nations with more abundant and easy oil fields such as Russia, Saudi Arabia and OPEC states tend to rely heavily on taxing these deposits for national budgets.
That said, Carbon Tracker makes a logical conclusion. Leading energy companies with large cash flows should be pushing transitions with new technology, management and engineering competency.
Countries that rely heavily on oil for social and budgetary means will gradually need to move to different national plans as other resources replace oil and gas. In many ways, there’s no reason some of those countries themselves can’t develop non-carbon businesses.