There’s a growing movement in Aberdeen for the region to lead the transition from Big Oil to Big Energy, using its deep-sea expertise to construct floating wind farms alongside offshore rigs.
“I think 2015 was the wake-up call that Aberdeen actually needed to say, ‘This ain’t going to be around forever,'” said Russell Borthwick, the local chamber of commerce’s chief executive. “When the oil price comes back, you [can] go back to just cigar smoking, wine drinking — ‘life’s great in Aberdeen isn’t it’ — but one day you’re going to wake up and there’s going to be nothing left.”
“[Renewable] investments are going to have to come from companies like ourselves, but we need to be able to have the balance sheet and the cash flow generation [from oil and gas] to be able to do that,” said Wael Sawan, Shell’s head of gas and renewables and a member of the company’s executive committee.
Keeping that option open is the primary goal of COP26, where 197 nations and territories with different economic priorities will try to agree on a plan of action.
“Emissions don’t have a passport, so we need to have a more holistic view here,” said IEA Executive Director Fatih Birol.
The business of oil and gas
The United Kingdom’s North Sea accounts for a sliver of global oil and gas output, but remains an investment hub for both domestic and international oil companies.
While the basin is nearing the end of its lifecycle, it still holds 4.4 billion barrels of oil equivalent, according to the United Kingdom’s oil and gas regulator. OGUK, the industry lobby, estimates that £390 billion ($534 billion) has been invested off the coast of the United Kingdom over the last 50 years, and that in the next five years, companies could commit another £21 billion ($29 billion).
Driving that spending is forecasts for demand through 2050. In a report earlier this month, the IEA said that if countries live up to current climate pledges, limiting warming to 2.1 degrees Celsius, demand for fossil fuels will peak around 2025. But even under that scenario, the world will still be consuming 75 million barrels of oil per day by 2050 — just 25 million barrels per day less than today.
“Right now you can get all the [publicly-listed] companies like ourselves out of the production of oil and gas,” Sawan said. “It will not have a single barrel of impact on the overall demand level, because all of that production will in essence migrate to many other countries — national oil companies — who will satisfy that demand.”
“The climate movement is very, very powerful at the moment,” Philip Lambert, who runs an influential energy advisory firm in London, said at a recent industry conference. “It’s swept through most of the key institutions that underpin our society in the West, and they don’t want people to invest in oil and gas anymore.”
An existential debate
Fossil fuel production remains a lucrative business. The 10 largest publicly-traded producers are expected to bring in almost $466 billion in revenue this year from the business of searching for and extracting oil and gas, more than in 2019, according to an analysis conducted by Rystad Energy for CNN Business.
“More than 80% of the emissions causing climate change come from the energy sector burning oil, gas and coal,” Birol said. “The amount of oil, gas and coal we use, it needs to go down substantially.”
Changes in the North Sea
Companies are still petitioning the government to kick off new fossil fuel projects, stressing the need to maintain UK production as aging ventures are decommissioned.
But efforts to diversify are ramping up.
“It is actually remarkable how fast things have changed in the past two to three years,” said Paul de Leeuw, director of the Energy Transition Institute at Aberdeen’s Robert Gordon University. “We have pressed the accelerator pedal. We’re off.”
Offshore oil and gas jobs in the United Kingdom still haven’t recovered from the pandemic. Companies are trying to stay disciplined on costs and keep shareholders happy even as oil prices climb. But researchers at Robert Gordon University suggest there are reasons for optimism.
Read More:Here to stay or gone in 30 years? Inside the fight over the future of the oil industry
2021-10-30 04:51:00