Category Archives: Paris Climate Agreement

Flood of Oil Is Coming, Complicating Efforts to Fight Global Warming

A surge of oil production is coming, whether the world needs it or not.

A Norwegian oil platform in the North Sea. Norway’s production has declined for two decades, but its development of the Johan Sverdrup deepwater field should reverse the trend.
A Norwegian oil platform in the North Sea. Norway’s production has declined for two decades, but its development of the Johan Sverdrup deepwater field should reverse the trend. Credit…Nerijus Adomaitis/Reuters
The New York Times, by Clifford Krauss, Nov. 3, 2019

HOUSTON — The flood of crude will arrive even as concerns about climate change are growing and worldwide oil demand is slowing. And it is not coming from the usual producers, but from Brazil, Canada, Norway and Guyana — countries that are either not known for oil or whose production has been lackluster in recent years.

This looming new supply may be a key reason Saudi Arabia’s giant oil producer, Aramco, pushed ahead on Sunday with plans for what could be the world’s largest initial stock offering ever.

Together, the four countries stand to add nearly a million barrels a day to the market in 2020 and nearly a million more in 2021, on top of the current world crude output of 80 million barrels a day. That boost in production, along with global efforts to lower emissions, will almost certainly push oil prices down.

Lower prices could prove damaging for Aramco and many other oil companies, reducing profits and limiting new exploration and drilling, while also reshaping the politics of the nations that rely on oil income.

The new rise in production is likely to bring economic relief to consumers at the gas pump and to importing nations like China, India and Japan. But cheaper oil may complicate efforts to combat global warming and wean consumers and industries off their dependence on fossil fuels, because lower gasoline prices could, for example, slow the adoption of electric vehicles.

Canada, Norway, Brazil and Guyana are all relatively stable at a time of turbulence for traditional producers like Venezuela and Libya and tensions between Saudi Arabia and Iran. Their oil riches should undercut efforts by the Organization of the Petroleum Exporting Countries and Russia to support prices with cuts in production and give American and other Western policymakers an added cushion in case there are renewed attacks on oil tankers or processing facilities in the Persian Gulf.

Driving New Production

Daniel Yergin, the energy historian who wrote “The Prize: The Epic Quest for Oil, Power and Money,” compared the impact of the new production to the advent of the shale oil boom in Texas and North Dakota a decade ago.

“Since all four of these countries are largely insulated from traditional geopolitical turmoil, they will add to global energy security,” Mr. Yergin said. But he also predicted that as with shale, the incremental supply gain, combined with a sluggish world economy, could drive prices lower.

There is already a glut on the world market, even with exports from Venezuela and Iran sharply curtailed by American sanctions. Should their production come back, that glut would only expand.

Years of moderate gasoline prices have already increased the popularity of bigger cars and sports utility vehicles in the United States, and the probability of more oil on the market is bound to weigh on prices at the pump over the next few years.

The oil-supply outlook is a sharp departure from the early 2000s, when prices soared as producers strained to keep up with ballooning demand in China and some analysts warned that the world was running out of oil.

Then came the rise of hydraulic fracturing and drilling through tight shale fields, which converted the United States from a needy importer into a powerful exporter. The increase in American production, along with a choppy global economy, shaved oil prices from well over $100 a barrel before the 2007-9 recession to about $56 on Friday for the American benchmark crude.

Those low prices have forced OPEC and Russia to lower production in recent years, and this year many financially struggling American oil companies have slashed their exploration and production investments to pay down their debts and protect their dividends.

An Era of Cheaper Oil

The new oil will accelerate those trends, energy experts say, even if only for a few years as production declines in older fields in other places.

“This could spell disaster for every producer and producing country,” said Raoul LeBlanc, a vice president at IHS Markit, an energy consultancy, especially if the United States and Iran come to some sort of nuclear deal.

Like the shale boom, the coming supply surge is a sudden change in dynamics. Guyana currently produces no oil at all. Norwegian and Brazilian production has long been in decline. And in Canada, concerns about climate change, resistance to new pipelines and high production costs have curtailed investments in oil-sands fields for five consecutive years.

Production of more oil comes at a time when there is growing acknowledgment by governments and energy investors that not all the hydrocarbons in the ground can be tapped if climate change is to be controlled. But exploration decisions, made years ago, have a momentum that can be hard to stop.

A drilling ship operated by Noble Energy for Exxon Mobil off Guyana. The South American country’s entry into the ranks of oil producers follows a string of major discoveries. Credit…Christopher Gregory for The New York Times

“Legacy decisions keep going,” said John Browne, BP’s former chief executive. “Things happen in different directions because decisions are made at different times.”

The added production in Norway comes despite the country’s embrace of the 2016 Paris climate agreement, which committed nations to cut greenhouse-gas emissions. Its sovereign wealth fund has cut investments in some oil companies, and its national oil company, Equinor, has pledged to increase its investments in wind power.

Equinor, which recently changed its name from Statoil to emphasize its partial pivot to renewable energy, nevertheless defends the new field on its company website, asserting, “The Paris Agreement is quite clear that there will still be a need for oil.”

Norway’s rebound from 19 years of decline began a few weeks ago as Equinor began production in its Johan Sverdrup deepwater field. The field will eventually produce 440,000 barrels a day, increasing the country’s output from 1.3 million barrels a day to 1.6 million next year and 1.8 million in 2021.

In Brazil, after years of scandal and delays, new offshore production platforms are coming online. Production has climbed over the last year by 300,000 barrels a day, and the country is expected to add as much as 460,000 more barrels a day by the end of 2021. In the coming days, Brazil is scheduled to hold a major auction in which some of the largest oil companies will bid for drilling rights in offshore areas with as much as 15 billion barrels of reserves.

In Canada, the 1,000-mile Line 3 pipeline that will take oil from the Alberta fields to Wisconsin, is near completion and awaiting final permitting. Energy experts say that could increase Canadian production by a half million barrels a day, or about 10 percent.

And the most striking change will be in Guyana, a tiny South American country where Exxon Mobil has made a string of major discoveries over the last four years. Production will reach 120,000 barrels a day early next year, rising to at least 750,000 barrels by 2025, and more is expected after that.

Guyana potentially has the most complicated future of the four countries. Its ethnically divided politics are sometimes turbulent, and Venezuela claims a large portion of its territory. But with the oil fields miles offshore, drilling is largely protected. In addition, Venezuela is mired in a political and economic crisis and unlikely to challenge a Chinese state company which has an oil investment in Guyana, along with Exxon Mobil and Hess.

Energy experts say the new production from the four nations will more than satisfy all the growth in global demand expected over the next two years, which is well below the growth rates of recent years before economic expansion in China, Europe and Latin America slowed.

At the same time, new pipelines in Texas are expected to increase United States exports to 3.3 million barrels a day next year, from the current 2.8 million.

That adds up to a vast surplus unless there is a resurgence of global economic growth to stimulate demand, or a prolonged conflict in the Middle East or other disruption to supply.

“To support prices, OPEC is going to have to extend and probably deepen their production cuts for a while,” said David L. Goldwyn, a top State Department energy diplomat during the Obama administration. “Getting the prices up to the point where Aramco can launch its I.P.O. is a big Saudi priority.”

The new barrels on the world market will also put pressure on companies producing in the United States, where profit margins for shale production are slim at current price levels and stock prices are falling.

“If I was in the business I would be scared to death,” said Philip K. Verleger, an energy economist who has served in both Democratic and Republican administrations. “The industry is going to face capital starvation.”

American oil executives express concern that drilling will fade in North Dakota, Oklahoma, Louisiana and Colorado as oil prices drop to as low as $50 a barrel in the next few years. Small companies are expected to merge, while others go bankrupt.

Scott D. Sheffield, chief executive of the Texas-based producer Pioneer Natural Resources, said he expected the growth of United States oil production to ease from 1.2 million barrels a day this year to 500,000 barrels next year and perhaps 400,000 barrels in 2021. Those increases are modest compared with the average increase of a million barrels a day every year from 2010 to 2018.

But Mr. Sheffield said he was optimistic, in part because new supplies coming to market could be offset by production declines in older fields in Mexico and elsewhere after 2021.

“There are no more big, giant new projects except Guyana,” he said. “We just have to be patient for a couple of more years.”


A version of this article appears in print on , Section A, Page 1 of the New York edition with the headline: Needed or Not, Oil Production Is Set to Surge.

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    Trump energy policy: more fossil fuels, less regulation

    Repost from ThinkProgress

    Trump ‘Completely Rethinks’ U.S. Energy Policy By Doubling Down On Fossil Fuels

    By Ryan Koronowski, August 8, 2016
    Republican presidential candidate Donald Trump delivers an economic policy speech to the Detroit Economic Club, Monday, Aug. 8, 2016, in Detroit. CREDIT: AP/EVAN VUCCI

    On Monday in Detroit, Donald Trump sought to reset his campaign again with a speech about the economy to begin “a great conversation about economic renewal for America,” portraying Democratic nominee Hillary Clinton as “a nominee of yesterday.”

    Trump aides told Politico prior to the speech that Trump economic vision also involved “a complete rethinking of our energy policy.”

    What does this “complete rethinking” look like?

    More fossil fuels. And less environmental regulation. A Trump administration would follow the same rhetorical stance on energy as the RNC and the Romney campaign, and the Bush administration’s policy playbook.

    The 2016 Republican presidential nominee cited “energy reform” as a priority midway through the speech, attacking “the Obama-Clinton war on coal” and boasting how his own plan to cut regulations on the fossil fuel industry would create jobs.

    “I am going to cut regulations massively,” Trump said. “Massively.”

    Beyond vague anti-regulatory rhetoric, Trump’s speech cited studies from the Koch-funded Institute for Energy Research, the Exxon-funded Heritage Foundation, and the American Petroleum Institute, all purporting to prove the economic ruin wreaked by the Obama administration’s environmental actions.

    Further detail was provided by a Trump campaign email sent to the press which outlined “policy highlights” from Trump’s economic vision:

    CREDIT: TRUMP CAMPAIGN EMAIL

    While Trump may not be able to accomplish all of his stated energy agenda, these policy highlights are essentially the same as the energy plan he outlined in May. His vision lines up almost perfectly with that of the fossil fuel industry.

    “Donald Trump’s energy proposals read like a gift registry for the fossil fuel and financial industries,” Greenpeace executive director Annie Leonard said in a statement. “If a U.S. president would attempt to enact any of these proposals it would not only undo the the progress millions of people around the world have achieved on climate change, it would set this country on a path to economic ruin and environmental devastation.”

    Trump would “immediately cancel” President Obama’s executive actions, singling out the Climate Action Plan and the Waters of the United States rule. Trump doesn’t mention that the Climate Action Plan’s carbon rule would lower electricity bills and the Waters of the U.S. rule actually helps protect small farmers against pollution from big agribusiness.

    He promises to “save the coal industry” — though international coal market dynamics are to blame and U.S. coal jobs are not coming back even with a President Trump.

    Bringing back the Keystone XL pipeline and drilling on the Outer Continental Shelf are goals that have been on the conservative drawing board for decades — hardly something that belongs in a completely rethought economic vision.

    Cancelling the Paris Climate Agreement and defunding U.S. contributions to United Nations climate programs would drag the United States and the world back decades.

    “Lift restrictions on American energy,” to Trump, means fossil fuels and not renewable energy sources like solar and wind, which are growing faster than fossil fuels and getting cheaper at a truly astonishing rate. Trump, however, said last week that renewable energy “is not working so good.”

    What the billionaire did not mention on Monday is how much climate change is projected to hurt the global economy: the United States will take a 36 percent GDP hit by the end of the century if its leaders allow it to suffer an unmitigated climate, according to research from ICF International and NextGen Climate Action. Globally, that number jumps to $44 trillion by 2060, according to Citigroup.

    Trump called Clinton “the candidate of the past” while his own campaign was “the campaign of the future.”

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