The UCL Ramsay Society held its Annual Debate on the Friday 4 March. The topic – ‘Does oil have a future?‘ – explored areas such as energy policies, emissions, sustainability and the cyclic nature of the oil and gas industry.
The panel members were; Professor Paul Ekins , Dr Myrian Schenk, Abhishek Goswami and John Kemp.The event ended with a Q & A session with members of the audience.
IChemE member Matthew Howard was there to report on the debate. Here are his thoughts:
It quickly became clear that this year’s UCL Ramsay Society Debate “Does Oil Have a Future” was somewhat of a forgone conclusion; its title mirroring alarmist traditions of media headlines which you could imagine exclaiming “Oil is Dead”.
While this would be great news for atmospheric CO2 concentrations, there was agreement between the speakers that yes, oil does have a future. But the question remains, for how long?
Professor Paul Ekins OBE, opened with a detailed exposition of historical patterns of global energy use, highlighting the dominance of transport in oil demand, and how viable electric vehicle systems coupled with vast improvements in electrical storage are rapidly approaching on the horizon. It is recognised that primary energy use in the OECD is now stabilising, yet continues to grow at an increasing rate in the rest of the world as more people gain access to energy resources. Disparities between absolute energy use per capita also remain stark however: compare Iceland (~17 te oil equivalent) with Eritrea (~0.1 te oe). The Professor then changed focus to the 2°C maximum warming target agreed at Paris in December, the emission reduction rate required to achieve it and consequent resources that must stay buried.
We hope debate exuberance can excuse Abhishek Goswami’s description of Paul’s stance as an “ideology”, as the content of his speech was generally factual, insightful and helpful to explain the recent collapse of global oil prices. As a Shell geologist, he supported the effort toward a lower carbon world, yet did not predict a date by which all oil production should cease. He delved briefly into the economics of the oil supply glut, observing how only a relatively small difference in oversupply (currently around 2 million barrels oil per day of ~96 mmbopd global production) has been a significant contributor to the ~70% collapse in oil price.
Myrian Schenk of Jacobs added a bleak outlook from the contracting world emphasising how numerous projects have been slowed, paused, or cancelled altogether. Operator appetite for investment is at a low ebb to say the least, as lower margin, high cost resources such as High Pressure High Temperature fields become even less appealing. Graduate recruitment is also at dismal levels leaving many students’ oil & gas ambitions as a bitter taste in an increasingly competitive employment palate. Approximately 250,000 jobs have been lost globally from the oil & gas sector through the price crash, yet Myrian remained steadfast in her belief that cost cutting will only be effective in a narrow set of business circumstances: the success of companies will now be dictated by their ability to accommodate and innovate.
John Kemp from Reuters News Agency brought a robust economic flavour, describing the real price of oil since discovery, and likening the somewhat cyclical price rollercoaster to a ‘badly tuned PID controller’. Clearly someone didn’t calculate their integral time quite right.. As John examined, when state players whose national budgets depend on oil revenues make decisions on production, a fall in price can create positive feedback in the short term as production is maintained or increased to protect against a deficit. On Paris and alternatives, John drew minds to the disjoint between global political commitment to the Paris agreement, and a lack of political will to act seriously to decarbonise, and to continue to decarbonise the global economy: oil and its derivatives remain and will continue to be effective, high density energy vectors.
Questions were widespread and many focused on fossil fuel alternatives or mitigations such as carbon capture and storage. These were at times discussed almost as ‘solutions’ to the current depression in the oil industry, but of course with super low oil prices, other energy sources are less able to compete in a market which places even lower inherent value on natural capital than just two years ago.
I challenged the speakers on the actual mechanism of the next “Grand Energy Transition”. In simplest terms, as long as there is oil accessible with fewer total man hours required for extraction than equivalents, it will continue to be produced. That is, unless our political leaders are strong enough to impose increasingly stringent regulatory or monetary frameworks, such as Obama’s recently proposed oil tax. With the rise of (I actually won’t mention the name) a certain populist billionaire, denying any problem with global emissions/resource scarcity/environmental loss, nonetheless able to garner electoral momentum, and here in the UK, government dismantling of renewable incentives, one fears that John Kemp for one is right to be sceptical on the our ability to meet the 2°C maximum warming target.
However, this only means that a CO2 emission price should be pursued even more fervently to minimise global impact. The international population and political influencers must continue to be educated. Voters should not see this as a regressive system, but a way to prove we are not slaves to the ’tragedy of the commons’. Such a system will define a clear fuel hierarchy, bringing a final end to coal (already well underway primarily due to other pollutants) an incentive away from oil and incentive towards, in the short term, its cleaner, lower kg CO2 per joule brother gas, which may temporarily please many of the supermajors with large gas resources and significant recent investment in LNG.
We need to move out of a time where we spend all our inheritance in a big splurge, and turn it into a system where everyone understands the planet’s limits. That’s until our decedents crack terraforming of Mars at least. In either case, eventually the future of oil, and its neighboring resources, can lie at peace, happily in the ground.
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