We had a very interesting national meeting this month entitled ‘How could the oil industry help decarbonise the global economy?’ It included a panellist from the US, Dr Larry Kremer,who joined two of our UK CCL expert members, Dave Waltham, Professor of Geophysics, who used to lecture about releasing oil and now lectures about how to lock it up and Brian Utton, (ex Castrol), who between them can clock up almost a century of experience in the oil sector!
Oil and natural gas companies are fully aware that they will have to adapt to survive and that fossil fuels are in danger of becoming a stranded asset. Happily for the industry they have the technology, expertise and locations needed to operate Carbon Capture and Storage (CCS). Indeed the expertise has been developing since the 1930’s, but there was no incentive because releasing carbon dioxide into the atmosphere didn’t cost anything. Not having to pay for the consequences of extraction was a very big invisible subsidy for the industry and it is interesting that Norway developed CCS at the Sleipner gasfield in order to offset the effects of a carbon price!
The new Northern Lights project will be taking carbon ‘waste’ from all over Europe, because despite the carbon dioxide shortage causing a beer and lemonade crisis a few years back the beverage sector can’t absorb it all! It only takes a carbon price of $50 per tonne to make CCS cost effective. Larry pointed out that the corn oil ethanol production industry in US states with a carbon tax found CCS to be cost effective at a carbon price level of $32.
The North Sea Basin is becoming the international leader in CCS – this chart shows what financial incentives have driven the development of the industry and the accompanying article, entitled Consistent policy support is key to unlocking investment in offshore carbon storage discusses the superiority of a carbon tax incentive as well as ‘consistent policy support’….
Shifting funding priorities have undermined UK CCS policy
The UK’s ruling Conservative Party has made investment in CCS a key pillar of its effort to decarbonize the economy. Opposition parties also support the technology, and the Scottish National Party (SNP) is spearheading efforts to develop a CCS industry in the region. Although the UK government has regularly provided funds for CCS research and demonstration projects, progress on launching full-scale developments has been limited so far due to significant and frequent shifts in state funding.…………..
As one of our panellists pointed out, the UK oil industry does have a plan but there is still uncertainty over what the Government will support, which makes committing to investment difficult! The oil industry in general is known to be keen on carbon pricing rather than regulation, which, as has been very clear in the US over the last four years, is very vulnerable to regime change!
The take home message from the discussion is that the oil industry knows which way the wind is blowing and can, with the encouragement of a reliable and progressive carbon pricing mechanism like Climate Income, be incentivised to put its all into CCS. Climate Income would be a far more effective way to transform the oil industry than confrontation as it encourages the industry to finance transformation rather than shutting down and taking the economy and our pensions with it!