Transitional Role of the Oil and Gas Industry in Addressing Climate Change

Abstract

The current atmospheric concentration of CO2 is at 411 ppm, rising at 2.7-3 ppm/year and by 2050, will be at a level not seen in the past 30 million years. World temperature rise is about 1.3 deg. C above pre-industrial levels with the climate change effects already noticeable. A realistic objective at this point is to limit the ultimate CO2 level below 700 ppm, limiting world temperature increase to below 3.2 deg. C to avoid the eventual melting of Antarctic ice sheet, which would cause catastrophic sea level rise. There are substantial differences in the amount of CO2 emissions depending on the type of hydrocarbons burned, with the lowest level of emissions coming from combustion of natural gas and ultra-light oils, including natural gas liquids. The oil and natural gas industry have undergone a shift in the past decade, with the largest new source of oil produced by the technical and economic breakthrough of fracking. This technology, the “marriage” of fracking and horizontal drilling, often also described as tight oil production, has several distinct characteristics; most importantly, the oil produced is virtually all ultra- light (lighter than 40-degree API) and natural gas liquids. Natural gas production is also rapidly rising in the USA due to “fracking” of shales and internationally due to many supergiant gas discoveries that will likely be transported to markets by new export pipelines and as liquified natural gas (LNG). This makes feasible a scenario where greenhouse gases emitted by hydrocarbons could plateau over the coming decades and then decline after 2040. Critical pre-requisites for this scenario include that coal production is gradually reduced by 50% in 2020-2040 and an additional 50% by 2060; that oil production reaches a peak by 2025 followed by a plateau through 2040 before declining at 1%/year; and while continuing the current shift to ultralight production, that gas production increases (by 60% over current levels by 2040) to fill the energy gap. The renewable+ nuclear share of energy production will need to increase from the present level of 15% to 30% by 2040 and 50% by 2060 so that overall world energy supply can continue to grow at the current rate. These targets can be reached with the impetus of a carbons emission tax on coal calibrated to encourage a shift to use of renewables, nuclear and gas for power generation. The United States is well positioned for this scenario. Natural gas production is booming, with the greatest increase ever recorded in the past 12 months and set to continue in the coming decade. The USA is now a net gas exporter and growing LNG supplier. Meanwhile, oil production has doubled within the past 10 years with virtually all the increase ultra-light oil and natural gas liquids. This trend should continue for the next several years. Greenhouse gas emissions are declining as lower price gas is replacing coal in power generation.

AAPG Datapages/Search and Discovery Article #90350 © 2019 AAPG Annual Convention and Exhibition, San Antonio, Texas, May 19-22, 2019