Rising Demand for Oil and Gas Projects Defies IEA Warning

Rising Demand for Oil and Gas Projects Defies IEA Warning

Despite the International Energy Agency’s cautionary advice, the oil and gas industry is expected to see an increase in new projects. The IEA has warned about the environmental impact of continued reliance on fossil fuels, but this has not deterred companies from moving forward with plans for expansion.

Explosive Energy News: Industry in Turmoil !

The Dallas Federal Reserve unveiled its quarterly survey of oil and gas companies yesterday, shedding light on mounting uncertainty and growing frustration with the Biden administration’s policies across the Permian Basin, just ahead of the November presidential election.

Nearly 30% of executives voiced concerns that new regulations regarding methane fees from the US Environmental Protection Agency would have a “significantly negative” impact on their operations. Meanwhile, almost a quarter of executives in gas-focused groups lamented the White House’s freeze on liquefied natural gas permits, which has “significantly” dampened their production expectations for the next five years.

In the words of one executive, “Uncertainty surrounding election outcomes and related policy changes has led most oil and gas operators to make only minimal investments to maintain production levels. We find ourselves once again entering an unnecessary period of uncertainty due to inept energy policies.

Yesterday, US Treasury Secretary Janet Yellen visited a solar factory in Georgia, underscoring concerns about China’s excessive production capacity in renewable energy. Yellen emphasized the adverse impact of China’s oversupply on global pricing dynamics, production patterns, and American businesses and workers. Additionally, she highlighted the pressing challenges confronting US solar manufacturing.

Also, Biden administration officials and Senate Majority Leader Chuck Schumer convened with union representatives in Queens to commemorate Equinor’s inaugural project labor agreement for its offshore wind venture, Empire Wind 1. This milestone coincides with positive developments in the offshore wind sector, such as the recent federal endorsement of Ørsted and Eversource’s Sunrise Wind initiative in New York and fresh bidding rounds for projects in New England.

Molly Morris, head of Equinor Renewables, expressed cautious optimism regarding the sector’s trajectory during the CERAWeek conference in Houston last week. However, she acknowledged the formidable task of meeting the White House’s target of achieving 30GW of capacity by 2030.

New oil and gas fields are anticipated to experience a significant surge

despite warnings from the International Energy Agency (IEA). Three years following the IEA’s cautionary note that no further oil and gas ventures are necessary to mitigate global warming, drilling activities persist.

According to a recent report by the Global Energy Monitor, an environmental research group, at least 20 new oil and gas fields received approval for development worldwide last year, collectively amounting to 8 billion barrels of oil equivalent in reserves. The monitor projects this number to expand nearly fourfold by the decade’s end, with an additional 31 billion barrels of oil equivalent spread across 64 newly permitted fields by 2030.

The emergence of these new oil and gas fields occurs in defiance of IEA advisories that there is no space for projects with extended development timelines on the path to achieving net zero emissions. The energy watchdog also predicts a peak in fossil fuel demand by the end of this decade.

Scott Zimmerman, the project manager of the tracker, remarked, “There is an overwhelming scientific consensus that new oil and gas fields are incongruent with efforts to limit warming to 1.5 degrees. Despite this, new discoveries and approvals persist.”

These findings from the Global Energy Monitor coincide with resistance from oil and gas executives against predictions of a rapid shift to renewable energy. Instead, they express optimism that demand for hydrocarbons will persist, at least until the 2030s.

US Leads the world in greenlit oil & gas project

Source: Global Energy monitor Credit; Financial Times

Over the past two years, the United States has taken the lead in authorizing new oil and gas reserves, with ConocoPhillips’ contentious Willow project in Alaska representing the largest approved endeavor in the nation, as reported by GEM. This surge in approvals coincides with President Joe Biden facing mounting pressure from environmental advocates to adopt a firmer stance on climate issues, while simultaneously grappling with accusations from the oil and gas sector of implementing overly restrictive policies.

A spokesperson for ConocoPhillips emphasized the significance of projects like Willow in ensuring environmentally and socially responsible energy production during the transition period. They highlighted the project’s positive impact on revenue for Alaska Native communities and its contribution to job creation.

Internationally, Guyana and the United Arab Emirates emerge as leaders in new project approvals. Notable among these approvals are the Hail and Ghasha gasfield by Abu Dhabi National Oil Company and ExxonMobil’s Yellowtail offshore development in Guyana.

Exxon’s Head of Upstream, Liam Mallon, underscored the perpetual need for renewal in the upstream business due to the maturation of oil and gas fields and the depletion of resources over time. He expressed Exxon’s commitment to expanding production while transitioning to a lower-emissions future, describing it as the “holy grail” the company is pursuing.

Mallon further asserted Exxon’s belief in the necessity of growing its oil and gas footprint while significantly reducing emissions.

Despite various challenges, companies maintain their dedication to exploration. GEM’s tracking identified 50 new project discoveries between 2022-2023, collectively amounting to about 20 billion barrels of oil equivalent. Countries such as Cyprus, Guyana, Namibia, and Zimbabwe, which have recently entered the production arena, represent the next frontier for the oil and gas industry, comprising more than a third of the discoveries.

Countries with little to no history of oil and gas production make up more than a third of recent discoveries

Source: Global Energy monitor Credit; Financial Times

The majority of new discoveries and approvals in the oil and gas sector are attributed to oil majors and state-owned companies. Among the significant projects unearthed in recent years are Iran’s Shahini gasfield and TotalEnergies’ Venus oilfield in Namibia.

A spokesperson for TotalEnergies expressed the company’s perspective on the future of oil demand, anticipating a potential decline around 2030, albeit at a slower pace compared to the natural decline rate of existing fields. They emphasized the necessity of new oil projects to meet this demand while maintaining acceptable price levels, thus facilitating a just transition period for individuals to adapt their energy consumption habits. The spokesperson highlighted the company’s adherence to stringent safety, emissions, and environmental standards in its operations.

However, the Global Energy Monitor (GEM) warns that due to the typical 11-year timeline from discovery to production globally, the new discoveries won’t be operational until the 2030s, a period when the International Energy Agency (IEA) advocates for production cuts, with some fields even requiring closure.

A recent report by Carbon Tracker scrutinized the 25 largest public oil and gas companies, revealing their significant deviation from the goals outlined in the Paris climate agreement. Furthermore, a United Nations agency issued a cautionary statement, indicating the imminent risk of temporarily breaching the 1.5°C threshold of the Paris Agreement, following the confirmation that 2023 ranked as the hottest year on record.

Scott Zimmerman, a representative of the Global Energy Monitor, stressed the alarming consequences of disregarding warnings against developing new fields, citing increasing extreme weather events and rising sea levels as indicators of the world’s future trajectory.

Original article on : https://on.ft.com/4czluNA

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