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The Good, The Bad and The Ugly When Oil Giants Shift to Natural Gas
Six large European oil and gas companies recently announced a commitment to engage on climate policy, calling for a price on carbon. The now-emerging picture of their coordinated corporate talking points, however, leaves no doubt that promotion of natural gas is a core part of the group’s position.
Is this development a beneficial push to help the planet transition to a low carbon economy – or just another marketing campaign? The truth, so far, lies somewhere in between.
Here are the good, the bad and the ugly highlights of what we’ve learned over the past week and what it all means.
The good: Establishing a carbon price and cutting carbon dioxide emissions
Make no mistake about it: The world’s leading economies need to establish a price and limits on greenhouse gas emissions, and leadership from the private sector is instrumental in achieving that policy objective.
For large companies such as Shell, BP and Statoil to join forces and unequivocally state, as they now have, that a price on carbon should be a “key element” of climate policy frameworks is a refreshing boost to pre-Paris United Nations climate talks.
It is a potentially powerful validation that even some of the world’s largest corporate emitters see an upside to carbon pricing and will weigh in to make it a reality.
As to promoting natural gas a solution, it is well documented that in many cases natural gas will replace coal for power generation – a shift already underway in the United States and partly responsible for driving down carbon dioxide (CO2) emissions.
The bad: Paying short shrift to natural gas’s Achilles heel
Notwithstanding the economic and carbon-dioxide benefits of coal-to-gas switching, there is a missing piece of the puzzle in the companies’ formulation to date.
One of the oil executives said “The enemy is coal.” Respectfully, that is incorrect. The enemy is climate pollution; coal is merely its most pernicious face.
Methane is natural gas’s Achilles heel. At close to 85 times more potent of a climate change forcer than carbon dioxide, methane emissions from the oil and gas industry undermine the very climate performance of natural gas that companies tout as a chief benefit relative to coal.
Indeed a recent report found that the 20-year global warming potential of methane emissions from the global oil and gas sector have the same near-term impact as about 40 percent of total CO2 emissions from global coal combustion in 2012. And that’s on top of the carbon dioxide from burning the natural gas.
Fortunately, the bad methane story can be solved at little economic cost, and while creating jobs in the process. If the companies put a fraction of the effort of promoting gas into promoting methane solutions – including the regulations we need to establish basic environmental safeguards – this bad news story could disappear.
A bold methane action plan that all companies embrace, and that includes strong regulatory assurances, is the missing ingredient – the elephant in the room.
The ugly: A leadership shortage
But we have a problem.
American companies (think Chevron and Exxon) are among the most well-resourced and inventive oil and gas companies. With a large stake in natural gas, they share an interest with European corporate peers when it comes to promoting a carbon price that displaces coal and resolving the methane issue before it gets worse.
However, these “super majors” have remained conspicuously on the sidelines of the European companies’ efforts. They’re even signaling an intent to stay there even as peers move closer toward embracing a lower carbon future
It is a missed leadership opportunity, but one they can still seize.
11 Comments on "The Good, The Bad and The Ugly When Oil Giants Shift to Natural Gas"
Plantagenet on Tue, 16th Jun 2015 12:47 am
It really doesn’t matter if US or EU oil companies call for a price on carbon production, as long as our political leaders like Obama and Merkel etc. refuse to take the necessary steps to curtail CO2 production. The recent proclamation from the G7 meeting that CO2 production can go on for another century was entirely the wrong message to send.
rockman on Tue, 16th Jun 2015 6:27 am
I suspect the industry is somewhat neutral on the subject of a carbon tax since they won’t be paying it…they’ll just be collecting it. If it’s across the board to all companies it won’t effect completion amongst them just as the motor fuel taxes don’t direct effect them. OTOH it might drive down consumption but since all the companies realize there’s decreases in resources available to them in the long run they wouldn’t be able to supply increasing demand anyway.
Davy on Tue, 16th Jun 2015 7:11 am
The world economy cannot afford another tax of any kind. It may be attempted because it is a great new mechanism for further corruption, manipulation, and disregard for the rule of law IOW wealth transfer from the many to the few. In that case sure TPTB will try it.
The question is if Main Street can stomach anymore wealth transfer in any form. Forget what they tell you because the pie is shrinking so shrinking the pie more and maintaining profits to the rich means only one thing further pressure on the real economy.
We are told there is global growth but I maintain it is not real and it is not productive. It is digital, manipulated, excess capacity, or plain old bad debt. Bad debt cannot pay for itself. Someone must pay the bill. There is no way to have you cake or pie or steak and eat it. Humans are good at fairytales even grown-ups.
Nony on Tue, 16th Jun 2015 9:41 am
I don’t see liquids-heavy US independents favoring this. Who cares if “Beyond Petroleum” does? They need to stop jerking around with their neoliberal politics and start learning safety and engineering.
drwater on Tue, 16th Jun 2015 10:56 am
Several comments:
On the article – overall pretty good.
“A bold methane action plan that all companies embrace, and that includes strong regulatory assurances, is the missing ingredient – the elephant in the room.”
Actually just a price on fugitive methane emissions would let the oil companies solve this themselves without more regulation.
Rockman’s comments – right on the money.
Davy – “The world economy cannot afford another tax of any kind.”
Not at all true if the carbon fee or tax is revenue neutral.
Nony – Exxon actually assumes $85 per ton internally for business case evaluation of projects and has come out in favor of a price on carbon over regulations or cap-and-trade.
One other thing this article and others miss is that assuming they can fix the drilling and transit losses, natural gas is actually 1/4 as carbon intensive as coal in power generation because it is chemically half as intensive and because the combined cycle gas power plants are almost twice as efficient. Carbon capture and sequestration from natural gas power plants is also far cheaper than for coal plants for a number of reasons.
GregT on Tue, 16th Jun 2015 11:06 am
But drwater,
Given that CO2 levels are considered to be ‘safe’ at 350ppm, and that we have now passed 400ppm, it shouldn’t be too difficult to understand that burning a carbon source ‘1/4 as intensive’ isn’t solving anything.
Davy on Tue, 16th Jun 2015 11:14 am
Dr, the revenue neutral is not the point. Less carbon means less growth which means descent. That is how simple it is to connect the dots. I have seen nowhere a true decouple of energy from growth plus we are at diminishing returns to efficiency and technological efforts as well as resource limits. Game is over friend there are no easy fixes just bad or worse trade-offs.
drwater on Tue, 16th Jun 2015 11:58 am
GregT,
Not sure of the basis for “safe” at 350 ppm. I actually figure that around 350 is optimal. The Little Ice Age is not something I want to return to. But you are right – we are at 400 and climbing, which is not good. I am more optimistic that we have a chance to turn this around, but we can’t keep screwing around about it.
We have to have policy that is effective worldwide and not the stupid UNFCCC concept of letting “developing” nations emit all they want. I still think a carbon fee with border tax adjustments would do the trick. It’s amazing what businesses can accomplish given the right market incentives and conditions.
Davy – the flip side of getting work from energy is entropy. The electronics revolution has allowed us to lower entropy, i.e. we have been getting and continue to get a lot more work and utility from the same amount of raw energy. Not saying all is going to be rosy on the economic front, but I think we can get by if we are smarter about things.
Davy on Tue, 16th Jun 2015 12:58 pm
Dr, that is the illusion we sell ourselves. The electronics revolution has just made us less resilient and sustainable. We are now dangerously exposed to the loss of those very electronics.
Just imagine what will be lost once or if the whole electronic sector destabilizes and becomes unreliable. Basically we will have pissed away a fortune for the titillation of complexity. Electroincs have created huge waste streams. I am not sold on more bang for the buck from electronics not when one considers the total equation.
Apneaman on Wed, 17th Jun 2015 10:00 am
More news on that global shale revolution. Wasn’t Poland the much hyped poster child for that just a year or so ago?
Polish shale gas hits a dry well
The exit of the last major global energy firm this month could mean the death knell for the country’s industry.
http://www.politico.eu/article/polish-shale-gas-hits-a-dry-well/
BobInget on Wed, 17th Jun 2015 4:41 pm
Affordability once again raises its ugly head.
I’m not picking on shortonoil, only a few of his statements.
One, present day oil doesn’t do the work of
that slippery stuff of yesteryear.
Let’s go down memory lane for a sec.
March, 2015 http://money.cnn.com/2015/03/16/investing/oil-prices-gas-6-year-low/
Two, Americans won’t be able to afford to eat, drink, drive, order stuff on Amazon, wage full time oilwars on multiple fronts. Why?Crude was too cheap to bother mining.
http://www.globalpetrolprices.com/gasoline_prices/
Higher taxes, oil prices, kill consumption, bad for the economy.
Note, in Venezuela gasoline is .02 a liter.
That economy is in tatters. Instead of
helping, the US forces Venezuela into China’s
open arms. Russia moves on Vene’s oil sands, America’s death-wish.