To gas, or not to gas, that is the question…

Contents

Preface;?Natural gas – in our face, like it or not;?Three end-members;?Domestic versus imports; Domestic versus international carbon footprint – a Chinese case study;?The deception of averages;?Closer to home – the UK;?Look before the logic leaps;?Why the international variations?;?Our own emissions or everyone’s?;?Invest in new developments, or cleaner production from old?;?The geopolitical thing;?What are the arguments for domestic supply?;?The cost;?But even if there is a cost…;?International gas – cost comparisons;?Jobs and the timescales of transitions;?If it works, that’s where the jobs are; ?Decommissioning;?So just how many jobs are there?;?The non-combustion question – hydrocarbons are not just fossil fuels;?The hydrogen thing;?What about the CCS?; Where domestically should we get it from, if we decide to go ahead?;?Onshore versus offshore;?What are the key routes for de-gassing;?Price driven fuel switching;?Ethics & carbon footprint of new O&G developments;?What is the minimum, and how quickly to get there?; ?Domestic vs imported LNG versus imported pipeline – managing the final countdown?; Ukraine postscript; ?If not Russia, where?;?Ultra long-term resource access and how much we value that;?In summary – a personal take.

Preface

Every so often I do a deep dive into a subject motivated by personal interest.?They are a tool I use to formulate my own views and collate relevant information. I like to share these as it provides opportunity to obtain something approximating peer review. ?For those few hardy readers that have the good grace to read through these tomes and provide thoughtful, polite, feedback, I’m always grateful.?They are as such works in progress, documentation of views that have the potential to evolve, but they do “poke the beast” a little to test boundaries and assumptions.?It would be boring if we didn’t.?

The place of gas in any energy transition has long been a topic of intense discussion, and so there are thousands of opinion permutations out there to test against.?If you are anything like me, and especially if you come with a past career in O&G, you have probably been wanting to understand the issues involved in more detail.?I wanted to navigate the logic of some of the views I’ve heard, deploying a reasonable whack of oil and gas exploration up my sleeve over the decades.??

I don’t pretend this article is exhaustive, it’s just my attempt to do a personal exploratory tour of the issues.?Likely my own conclusions will have some differences with yours, but even if that is the case, I hope the information collation is a useful one to you.?As a spoiler alert, I am not anti-gas, I recognise it has a long-term place in the world’s future, if we can indeed contemplate saving some of it.?I am just anti-burning it as fast as we can.?I am for stopping doing that as fast as we can, recognising that quantifying the “as fast as we can” bit is a topic of much controversy.?We do know it won’t be overnight.??We do also know there is urgency to getting on with it.

This article was largely written and researched before the invasion of Ukraine by Russia, and obviously events have taken a tragic and abrupt turn with profound implications for things more important than commodities.?No insensitivity is intended to the events taking place there, or the great pressures being placed on eastern European countries to respond appropriately.?A very difficult situation.?Nevertheless, it is hard not to observe that it places the role of gas under a level of scrutiny that is unequalled in its history.??It is with a chastened and sombre reflection then, that I continue.

Natural gas – in our face, like it or not

Whatever we think about natural gas’s role in the future, it’s impossible to deny its role in the present.?Many of us still use it for our home heating.?It is a raw product for hydrogen and its role in ammonia and fertiliser production – that is to say our food, and miscellaneous other industrial needs, including those where a big whack of heat is needed.?It is still a very large part of the UK’s electricity production – BEIS statistics in Q1 2020 say it provided 31% of our power (see Figure 1).?Interestingly that’s quite a big reduction on Q1 2019 – when it provided 42%.?That 11 % change came almost entirely from an increase in renewable electricity supply over the same period from 36 to 47%.??

For what it’s worth though, as I write this paragraph in mid Feb 2022, natural gas is supplying 49% of UK power (Figure 2).?Even if the proportion is going down, there are moments when it dominates.?We are far from weaned off it. ?For what it’s worth, electricity demand for gas also went up 7% in 2021 compared to 2020, because of a lower renewable input – so clearly there are annual variations as a function of weather and demand too (Figure 3).

Gas then, is a big part of our present.?None of us, if we use the national grid, or food produced using fertiliser, can claim to be independent of it.?What though is its role in the future, and more specifically, what is the role of the UK’s own gas in the future?

Three end-members

There are fundamentally only three positions we can take with respect to natural gas production.?The first is business as usual, no need to change.?The second, is stop all gas production immediately.?The third is proceed to some minimum gas production threshold over some timescale, as fast as we can (Figure 4).?

Between those three end member vertices, there are various permutations, but that is essentially the choice.?Now the third one, the top apex, is of course quite vague in detail, but conceptually it is where many of us lie. In the second option, simply if the gas was shut off immediately, our homes would be cold, or at increasing risk of blackout at low renewable power generation times.?So, most thinking adults aren’t looking for that, not yet. The first one, business as usual, is the premise of those who don’t accept anthropogenic global warming is a problem.?I’m not going to discuss that position in any detail other than to acknowledge that a few hold to it.?

For most of us the third position, the top apex of Figure 4, is where we are at.?The disagreements, and they are passionate, are over what the minimum production is, and what timescale it should be achieved over.?Now those are big disagreements, this cannot be denied.?It is however worthy of reflection for at least a second or two, that this is the vertex most of us are landing on.?However vast the gulf that lies between different camps sharing that vertex, there is value in recognising that it is an agreement of sorts - the vertex where most of us lie.?In doing so, in recognising and acknowledging it’s about minimum production floors and timescales, I think it helps the conversations to progress to useful quantitative discussion agendas.?

I’m not going to talk any more to the first two positions – namely “stop immediately” and “business as usual”, so if that’s you there is nothing more to see here.?I’m going to focus on the third vertex, where there is some decreased use of natural gas we are aiming for – in all its usage contexts - and there is some timescale over which we want to achieve it.?

I’m not going to seriously attempt to answer those questions here about which minimum and which timescale quantitatively - to manage expectations.?I talk to it a little bit more later, but from afar, not in detail.?Instead, I’m going to look at what the options are to achieve that goal qualitatively, whatever those variables might be.?I’ll be talking about some quantities, but I’m not going to deliver an end answer.?

Domestic versus imports

A key question that keeps coming up in the UK, is the extent to which we should continue to nurture the UK’s long-lived domestic gas production industry, and more specifically, the benefits of doing so over imported gas options.?

Before we do so, there are certain fundamentals that it is worth coming to grips with about gas production, as we examine this question in more detail.?Figure 5, courtesy of good old wiki shows some of the key steps.?Figure 6 talks a little bit more to the greenhouse gas footprint of individual steps.?Note this figure is total greenhouse gases, not just CO & CO2, so including methane.??

Upstream we see that the typical components responsible for a carbon footprint include formation sourced CO2 venting, other venting of greenhouse gas, fuel combustion related to the production, flaring, and leaks from equipment.?

If we want to take the natural gas and ship it, as per the processes outlined in Figure 5, we see that there are further emissions the moment we choose to process for LNG production.?That includes those emissions related to refrigeration (to liquefy), acid gas venting (see Figure 5), further leakage and any flaring, and power production.?These are further emissions before we even start thinking about those involved in transporting it via shipping.

The immediate implication, one would think, is that it must involve a lower carbon footprint to pipe natural gas than it does to ship it in LNG form.?We will examine this further shortly.?

Returning to the question of domestic production over imports though, what are the key arguments for domestic gas production??Typically, the biggest hitters from a non-exhaustive list, can include:

1)?????A lower carbon footprint of domestic gas over imports.

2)?????Geopolitical security of supply.

3)?????Other environmental assurance of domestic c.f. international production.

4)?????Local job creation/preservation.

5)?????Cost benefits.

Domestic versus international carbon footprint – a Chinese case study

A fascinating look at the carbon footprint of Chinese natural gas delivery via different routes – is provided by Gan et al 2020 as shown in Figure 7.??It shows that domestic conventional gas production typically has the lowest carbon footprint and averages 15.5 gCO2e/MJ.?Extraction and processing tend to form the biggest components of that, though for a minority, gas transmission (pipes) starts to become important. Presumably this is because China is big, and some domestic producing fields still have pipelines that travel a long way.?

When we look at unconventional gas production (shale gas fracking) of Figure 7 we see the far greater energy expenditure involved in production having an impact, with processing and transmission being relatively low components proportionally. The average increases from conventional by 38% to 21.4 gCO2e/MJ, though interestingly the footprint of gas processing for unconventional is much less.?Perhaps because gas produced in this way is relatively “fresh” methane uncontaminated by long geological residence times and more diverse source rock products – i.e. requiring less “sorting”. ?I don’t know though – still checking up on that one.

When we look at overseas LNG, we see the introduction of two new and important parameters – the carbon footprint of gas liquefaction and LNG storage and shipping.?Together these vary from about 30% to 60% of total production footprint, no doubt in part also depending on whether the source LNG is conventional or unconventional in origin.?At an average of 19.7 gCO2e/MJ overseas LNG represents an increase of 27% over domestic conventional sources but performs well relative to domestic unconventional resource.?

Counter-intuitively the carbon footprint of piped international gas in China in Figure 7 does worse than the shipped LNG, despite having no storage, liquefaction, or shipping component.?At 35.9 gCO2e/MJ it is a 131% increase over the base domestic conventional supply.?

?So, what is going on there? If we look at Figure 8, and read the Gan et al 2020 text, we find that the pipelines come from Kazakhstan, Myanmar, and Russia.?The biggest cause of this massive component of transmission related GHG footprint of the pipelines, is simply leakage.?If this element could be removed, the average for internationally piped natural gas would compare very favourably with the best of the domestic conventional production.?

Those gas producing countries with enough gas to export, and cashflow to gain by doing so well, mostly tend, unsurprisingly, to be reasonably efficient producers. The efficiency of these pipelines into China, clearly though, doesn’t seem to be as good as it could be. ?Kazakhstan, Myanmar, and Russia, for whatever reason, would appear to be more interested in the quick return rather than an optimised one.?

To test the assertion that piped international gas can be as clean or cleaner than domestically supplied gas, let’s turn to another country example, a bit closer to home if you happen to be based in Europe. First though, a brief aside on some illusions of number crunching.

The deception of averages

The deception of averages is a trap to be wary of, and relevant to our forthcoming discussion.??Specifically, the danger of looking at averages in isolation from the frequency distributions.???

Imagine we have two populations A and B, and the average of A is better (lower) than that of B, and so A is “better”, right???As in Figure 9.

Well, no, not necessarily.?We look at the range of distributions for A & B and we examine the reason for those distributions.??It may be that reproducing the best performing of B could be a far better and cheaper option than sticking with the distribution provided by approach A, which for all we know could fall towards its worst end in our future application of it.??Again, see Figure 9.?That’s not the only permutation possible of course, but it is a possible one.?Maybe we can clean up the mid-life dirty producers far more, to a lower level, than we can to the late life currently cleaner ones.?

The point is we just don’t know from the average alone.?Looking at an average of a population tells us very little.?Understanding the reasons for a range in a distribution tells us a whole lot more and empowers much better decision making.??The reasons for stressing this are that average production carbon footprint figures for a country are not the best basis for decisions on their own.?More detail is needed.

Closer to home – the UK

In the UK, the statistics are a bit different to China.?Looking at Figure 10, the piped gas comes predominantly from Norway and so not a long way, but it is the cleanest source of natural gas – at 18 kgCO2e/boe.?Clearly Norway is doing a good job, if one doesn’t consider it an oxymoron, at minimising the carbon footprint of the gas it does produce.?Domestic UK gas production isn’t far behind though, at 22 kgCO2e/boe – but still, that’s a 22% increase.?So, if we wanted purely to minimise the carbon footprint of gas production, then UK - import it all by pipe from Norway! ?Clearly that’s not a serious suggestion, as there are all sorts of other reasons for not getting it from one place, and Norway has other customers.?It probably doesn’t want to sell so much of its gas to UK.?But it makes the point.?If it’s only about minimising carbon footprint, it’s not automatically about going domestic.?

What we find on further inspection though, from Figure 10 and 11, is that LNG imports are averaging more than two times (2.7x) higher in terms of production carbon footprint than domestic production.?So, at first glance then, there is a clear driver, one might conclude, for domestic North Sea production at least – from UK, Netherlands, and Norway, rather than LNG imports – if the name of the game is to reduce carbon footprint.?

Look before the logic leaps

Now to focus more on domestic production, it is true, is one possible avenue for reducing the carbon footprint of gas production.?But let’s ask ourselves the question – what hides in the detail here – what are the implications of that, and what other options are there?

The first thing to say is that there is domestic gas production and there is domestic gas production. Are we talking about existing field workovers and re-developments??Are we talking near field exploration of smaller satellites??Are we talking completely new wildcat exploration??Where??Existing North Sea or Irish Sea Basins??West of Shetland??Frontier Basins of the Atlantic Margin or Channel & SW approaches??Onshore??How does the carbon footprint of gas produced from each of these vary??I don’t know the precise details, but one would hazard a guess that it does vary a lot, and that gas production from a new undiscovered development on the Atlantic Margin would have a far higher footprint than extended development of an existing Central North Sea Field.?Or maybe not.?Depends on the field infrastructure maybe.?Whatever the case, we can reasonably expect a large variation within domestic production.?

We can also expect there to be options and variation within the imports from overseas, and potential for considerable improvements.?That raises the question – what is actually preferable – a brand new gas development domestically that might have an elevated footprint over the average (let’s say 50% for the sake of argument at 33 kgCO2e/boe) or improvements and reductions in an existing import source??Let’s say for the sake of argument we could reduce the footprint of emissions from existing Trinidadian fields by 50% from 53 to 26.5 kgCO2e/boe.?Would imports from existing fields internationally sourced be preferable to new developments domestically sourced, if it was a brand-new domestic development at the 33 kgCO2e/boe??

These are hypothetical scenarios, but they illustrate the point.?Averages are not sufficient to make decisions.?There is a much more intense level of scrutiny required.?Figure 12 shows the full range of carbon footprint values for production from UK’s LNG gas import sources.?It varies from 29 kgCO2e/boe from Norway to 144 kgCO2e/boe from the US.?A factor of 5 difference.?Averages aren’t enough.?They need to be accompanied by distributions.??

Yet as Table 1a & 1b, Figure 13 and Figure 14 shows us, focusing only on the production carbon footprint alone is also misleading and by itself would lead us to overestimate the importance of the production footprints. If we focus only on the production footprint, then it might seem like domestic production provides footprints with an improvement of ~25-85% (average 63%) as per Figure 14.?

That seems like a big difference.?However, the missing big part of the story is the scale of these production differences compared to the carbon footprint of the gas itself, as it is used and emits.??This is the same however it is sourced and always forms most of the emissions.?The production carbon footprint is only a modest percentage of this.?That means the total footprint of domestic production compared to imports is more typically an improvement of 2-30% (average 12%) as shown in Figure 14, and not the 25-85% imagined by looking at production footprint alone.?Still an improvement, but not nearly as big a deal.?It also means that the place to focus on improving carbon footprint is the place where the biggest, chunkiest improvements can be obtained. ?

Why the international variations?

Given the undoubted variation in production footprints, why are the emissions from the US so high??Of the elements shown in Figure 6, Clean Energy Wire notes “flaring, venting and leakage of natural gas are a much bigger issue in the Permian” – referring to the US Permian Basin which sources much of its LNG exports (https://www.cleanenergywire.org/news/unravelling-climate-footprint-us-liquefied-natural-gas ).?We see this reflected in flaring statistics from the World Bank for the US in Figure 14, and similarly for Russia and Algeria, though note these refer to oil production related flaring as well as gas.?Interestingly Russia is [was] one of the better performing international nations supplying UK gas.?It has [had] an imported gas production footprint of 52 kgCO2e/boe, just 36% that of the United States.

We can also see from Figure 15 when it comes to flaring, Qatar and the UAE are actually performing better than the UK.?Why is that??Is it because they are monetising their gas adeptly??If so, it would suggest that importing gas from countries that have been historically focused on oil – encouraging them to export it rather than flare it - can be an excellent way of encouraging decreased carbon footprint of gas production.?This, at a scale to dwarf anything that could be done in the UK domestically.?That’s not going to happen overnight, but a pipeline extension might be incentive to significantly reduce gas flaring.?An avenue for all parties to explore.?

Our own emissions or everyone’s?

So, a fundamental question here – is it best to improve carbon footprints of gas production in some of the world’s biggest producers, or to initiate new developments domestically??What are the ethics of promoting new developments when improving existing gas production footprints might have a far bigger global impact on emissions reduction??Open question.?I don’t pretend the answer is easy, but I do suggest it is a question worth asking.?

If pipelines with rigorous attention to leakage prevention offer big improvements over LNG imports in terms of carbon footprint, what are the UK options there??Of the existing countries we import gas from - which ones not already piping gas (Norway, Netherlands) might do so??As we see in Figure 16, of existing suppliers, it is really Russia and Algeria that would normally offer the most potential for new pipelines to reduce LNG related export emissions.?Obviously recent events in Ukraine make one of those effectively impossible for the foreseeable future.?Of new suppliers, Libya and Azerbaijan, and even Kurdistan hold a theoretical potential.??

However, we also have to ask - would these places want to export more to the UK??They are all fast-growing nations, with rapidly growing domestic demand, and with a wealth of other customers, often including similarly growing neighbours.?UK isn’t always flavour of the month…and anything that came to us through pipelines from these places would have to pass through a number of other countries first.

If they did want to sell to us, would we want to buy??They all have various geopolitical issues and even if they were deemed to be politically savoury on their own, they may be vulnerable to disruptive activities beyond their own control.?Geopolitical risk.?We’ve seen how quickly things can change with respect to Europe’s reliance on Russian gas. ?Thankfully UK’s reliance is much less than our friends further east.?Whoever is in question, we don’t want to hamstring our own ability as a nation to object to objectional behaviours. As with most things, choices are to be made.?Not easy ones.?

Invest in new developments, or cleaner production from old?

Let’s return to another ethical question – in a world where anthropogenic climate change is an increasing emergency, is it ethical to begin new oil and gas developments domestically in the name of production carbon footprint? ?Even if we accept that overnight halts in production are impractical, far greater carbon footprint reductions may be obtained by focusing efforts elsewhere.?Perhaps the greatest gains are to be had by insisting on cleaner production and export from existing fields and near field developments in the large producing nations??Whatever our view on that, it is a reasonable question, isn’t it? ?

I’m not leading to a particular answer, not yet anyway, but I am posing the question.?

After all, we are either trying to seriously reduce hydrocarbon combustion, or we aren’t. ?Aren’t we??If not speak now or forever hold the peace.?Is that compatible with new oil and gas developments domestically when there is huge supply from the biggest producers more than able to cope??If international sources have higher carbon footprints, is not a better question how to change that rather than how to avoid it?

The geopolitical thing

As Figure 12 shows, the UK currently obtains its gas from 13 countries in five continents, including itself. The political spectrum of the source countries ranges from long lived European OECD democracies, to reasonably stable Latin American nations, African nations large and small, Middle Eastern Emirates/Monarchies, and then to the USA and Russia, both emphatically in categories of their own.?That is quite a geopolitically diverse market.?Recent years have illustrated how even stable democracies can pose rapidly varying fiscal risk.?The biggest exposures externally are from Norway, Qatar, Algeria, USA, Russia, Trinidad and Tobago, and Netherlands.?Even that seems to spread the risk fairly well, notwithstanding that we have seen the vulnerability from Russia manifest totally in recent days. There is at the end of the day a diverse security of supply.?

The opportunity to recruit other newer markets is perhaps not nil either, but it takes time.?Libya is still in a delicate situation but a lot more stable than it was.?Azerbaijan is already exporting into Europe.?As shown in Figure 17, there isn’t really any shortage of options. ?All of them would take time to mature – years.?Argentina is also on the cusp of exporting LNG from its Vaca Muerta shale gas reserves in Neuquen province.?

The UK has had it good in terms of domestic supply for a long time, so getting used to increased percentage of international supply would be a shift.?This is however something that has been routine for many countries for a long time.?From a geopolitical perspective, the earth has shaken in the past days, and so this has concentrated minds in looking forward.?However, there are really only three theoretical options – 1) new international supply 2) ramp up domestic supply 3) move away from gas through some means.??Of these the timescales on 2 and 3, assuming they are possible, are much longer than 1).?

And as some countries experience trouble – I mean who knows whether stability in Arabia and the Middle East is assured – so too others are periodically released from instability or sanctions.??Libya, Venezuela, and Iran spring to mind as future possibilities.?

So, from a purely geopolitical perspective, while there is always a price vulnerability if source has to change suddenly, maybe the vulnerabilities in terms of absolute supply are sometimes overstated. I know that’s a bit rich coming right now, but actually UK has done a fairly decent job of spreading the risk and lessening exposure to Russian gas already.??The vulnerability to price of depending externally is not nothing, so maybe there is the bones of case there, but the subtleties are perhaps more involved than they are made out.?New domestic supply is not necessarily cheap either.?As any carbon pricing kicks in further, that changes the subtleties further too – one way or the other.?The best choice depends on the specifics of the individual projects or import routes concerned, and not on catch-all averages across every source.?

What are the arguments for domestic supply?

We have seen so far that there are arguments from carbon footprints and geopolitical vulnerability for ongoing domestic UK gas production.?We have also seen that this is far more subtle and nuanced than might first be gleaned, and not nearly as large a factor as often implied by various parties.?It’s burning the fossil fuel that carries the killer punch, not where it was made. ?Sure there are important improvements to be had in production, but they are simply reducing the rate of damage, not reversing it.?

Domestic carbon footprint attractiveness relative to overseas depends on the place and style of supply within the UK, and where overseas we compare to.??Each project will be different.?International supply carbon footprint likewise depends on the manner and origin of import.?Improvements that would benefit the whole globe in many of those huge producing regions may be far greater than anything a new domestic investment in the UK might offer.

So, what then are the main arguments for domestic gas production??The way Oil and Gas UK (OGUK – the trade association for the UK oil and gas industry) sees it is shown in Figure 18.?The question is posed in this figure – why does the UK need new oil and gas fields???We see in the top left of Figure 18 a discussion of the current consumption.?This figure however answers a different question – namely why UK needs some gas for the immediate future.??That is not really contested.??Home heating, transport, power generation, all depend hugely on fossil fuels at the present time, so we can't shut down tomorrow.??

There is nothing here that says explicitly this supply has to come from new fields domestically.?All these three usages are expected to transition away from gas with time – over what time scale is anybody’s guess.??The direct aim to achieve this is to 1) reduce vehicle fossil fuel usage through electrical vehicles and public transport planning, 2) Increase the amount of building heating supplied through other means than fossil fuels – including less wastage, local residential renewable energy, and heat pumps, and 3) transition an increasing amount of power generation to renewables.??These three usages listed by OGUK are all then likely to be on significant decline.?There may be hiccups in supply chains on the way to that reduction.?It might take a long time, but decline nonetheless.?Not then really, a case for new domestic supply per se.

Moving on, in the top and bottom right of Figure 18, we see a listing of North Sea trends and resulting production trends.??This is really just a listing of facts about relative decline in the oil and gas industry in the UK.?Well, OK, but this in itself is not per se any argument to stop the decline, it is just a listing of facts.?Undeniably, it is in decline.?

Really the OGUK’s reasoning to continue domestic gas production is summarised at the bottom left – and it is in two points – increased costs, and the jobs that depend on oil and gas production.?They provide what is presented as a net cost of imports.?Though the assumptions built in the cost calculations are not easily available to audit, let’s take them at face value.??An extra cost of ￡7 billion is estimated as the cost of oil and gas imports over domestic production in 2019.?

The cost

The first thing is to say that this price is a function of current carbon price, as shown in Figure 19.?This is not something that is constant in time.?The relative cost of production here versus internationally will depend both on the carbon pricing at the point of source, and how that carbon pricing is changing with time.?That is to say, who can improve most significantly, fastest.??

The carbon price in most places will grow in importance.?As recent events have shown it is not immune to its own vulnerabilities, but long term, increasing carbon price seems the likely trend.?The scale of the challenge there is illustrated in Figure 20 which outlines OGUK’s own view of the emissions of UK offshore installations.??The fact that UK production is predominantly offshore is a flag in itself, since the options for decarbonisation offshore are somewhat more limited, and more expensive.?It is gas turbines for power generation which in 2019 formed the lion’s share of the offshore industry’s emissions – two thirds of them.?Flaring was just under a quarter.

It is worth reflecting in this context from Figure 12, that the countries we import from which have overwhelmingly onshore production include(d) Russia, Peru, Algeria and the US, so arguably these are the countries for which further decarbonisation of production might be easiest.?In the US we have the caveat that most of the exported production is from unconventional shale sourced gas, so more energy intensive and a bit different.??

But even if there is a cost…

At the end of the day though, there is a decent point made in Figure 12, that while it has to be assessed on a project-by-project basis, it may well be more costly to the UK to import gas - even with future improvements overseas.??The real issue though is whether UK citizens are willing to pay that cost to avoid the new domestic oil and gas development ethical questions.?A ￡7 billion cost difference is after all 63% of the ￡11 billion international aid budget, or 16% of the annual UK defence budget (about ￡45 billion).?The cost of UK’s new three-submarine nuclear deterrent alone is ￡31 billion.?

The cost per household calculated by OGUK for importing oil and gas is ￡241 per year.?That’s about 3.8 weeks of the average UK household groceries bill of ￡64.?It is almost exactly half what the average household spends on alcohol a year of ￡484 ( https://www.nimblefins.co.uk ).??Now I’m not belittling ￡7 billion or ￡241, but I am suggesting the UK taxpayer might appreciate being asked whether they want to spend it.?No doubt as prices rise, that difference may rise too, but as prices rise, the benefits of a total fuel switch also become much more attractive.

The OGUK position on rate of change is a view that UK’s domestic production should decline at roughly the rate demand itself declines.?To quote OGUK from https://oguk.org.uk/uk-must-allow-new-oil-and-gas-fields-or-risk-surging-import-bills-and-future-shortages-say-industry-experts :

“A key point here is that it’s demand that drives emission levels – not supply. Our population cannot change the way it uses energy overnight. So, if the UK stops extracting its own oil and gas, without an equivalent reduction in demand, then imports will have to rise with no reduction in overall emissions.

OGUK’s view is that the UK’s production of oil and gas should decline at roughly the same rate as demand – so giving the nation some energy security and keeping import bills down”.

The crux of the OGUK argument then - apart from the jobs thing - is that as production declines imports will rise and there might be a cost to it.?The actual scale of that decline is elaborated further in Figure 21.?What we see is that from committed oil and gas projects, by 2030 about 1/3 of demand will be domestically supplied.?Instigating additional projects might change that to a half.??By 2050 though we see some interesting trends from OGUK’s own work.?Firstly notice the scale of the envisaged demand reduction.?In 2025 about 72% of the total energy demand is being met by oil and gas, whereas by 2050 it’s just under a quarter.?The 2050 demand is just over 20% of the 2025 demand.?

Why is that important??Well, it relates to the size of the prize.?The yellow UKCS production line in Figure 21, assumes ongoing investment in production and exploration - and the difference it would make in 2050, compared to not doing so, is in absolute terms about 30 Mtoe a year.?That is a figure that is only just over 20% of today’s demand.?In other words, the size of the prize from further investment is relatively small in scale in today’s terms, in something that is inevitably set to decline whatever happens.??We are going to have to learn to do without it eventually anyway.?So, are ethical arguments for not doing large new domestic developments worth transgressing for the size of this prize??Perhaps, perhaps not, but this is the question we will inevitably end up asking.??

International gas – cost comparisons

If cost is the key component though, we have to say there are some big things to consider on the international scene.?If we look at Figure 22, it shows the domestic cost of gas in selected other countries.?This of course is very different to the actual price of production, as some governments may be heavily subsiding it.?However, as a first proxy it serves to highlight those countries where cost of production is remarkably cheap.?That likely means the cost of any further reductions in carbon footprint are going to be relatively cheap too, compared to the UK.??

Of the existing producers supplying UK, Algeria and Russia are by far the cheapest.?Their domestic consumers pay a price that is about 6% and 14% respectively of what UK domestic customers pay.?Of those countries that are not current suppliers, but which might one day become so, and which pay less than a quarter for their gas than UK citizens – Iran, Argentina, and Azerbaijan are prominent.?Argentina is notable for being on the cusp of new LNG export facilities (https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/natural-gas/121021-argentinas-ypf-studying-lng-export-for-growing-vaca-muerta-gas-production ), though such development would not be issue free.?In the slightly more expensive but still cheaper than UK bracket, Canada and Colombia appear.?

So, is cost to the UK consumer really the barrier it might at first glance seem to be??There may be degrees of freedom that have not been fully explored. ?Especially if sanctions on Iran are lifted anytime soon.

Jobs and the timescales of transitions

Employment is important.?It is a task of government to make best efforts to ensure regional development and employment.?Furthermore, when industries are in trouble, the government has a duty of care to those involved - to ensure timely and just transitions, and skills training for transference to new industry.??What the taxpayer is not in the business of is prolonging careers.?

The UK has historical baggage on the fossil fuel employment front.?The battle that took place between the miners’ unions and the Thatcher government is indelibly and painfully etched in memory.?It still remains controversial today so I don’t want to stir up old wounds - but some observations would be salient – namely that time, warning and re-training matters.?Brutally allowing an industry to shut down quickly and rapidly without giving those involved fair chance to transition - is helpful to no-one.?Equally, it is not doing a region any favours in the long term to indefinitely subsidise ongoing employment in a particular capacity - if that industry is only going in one direction.

In a nutshell, there is a big difference between ensuring a phased transition of jobs into new avenues, and proactively taxpayer-subsidising new positions in old industries for which the business-case jury is out. ?

It is also a question of priorities.?What is the priority here??There needs to be action on the first priority – not getting distracted by many.?Where priorities conflict we cannot do both.?In that case we can phase a transition from one priority to another, but we cannot pretend both are compatible.?In this particular case, either the first priority is reducing emissions, or the first priority is existing job preservation.?These two priorities – for now - are fundamentally in conflict in the energy industry.?That’s not to say there is not a case for phasing appropriately, but it is to recognise the status quo cannot be entrenched indefinitely.

Things cannot be shut down over night.?What the numbers of jobs in Figure 18 tells us is that there is care to be taken, and people to be looked after, if (when) new directions are taken.?There is though, a big difference between 1) allowing a quasi-natural decline to take place with adequate support, and 2) injecting major taxpayer investments into what ultimately may be dead ends.

If it works, that’s where the jobs are

In terms of energy investment, the best solution should always be devolved from employment questions.?Solving what the best solution is in terms of energy and encouraging that, is the best long-term way of ensuring jobs and regional development.?Sort out the optimal ways forward and the jobs and careers will follow.?Investing in something only to prolong jobs is a non-sequitur.??Not that those jobs are unimportant or not requiring concern and care, but they are not the raison d’etre for large taxpayer funded future investments – especially if they incur significant environmental damage.?

We cannot individually speak for those in underdeveloped regions of the UK, looking for regeneration, but I can’t help feeling that what is being looked for is not another free spin of the employment Russian roulette wheel, but rather investment in the industries that have genuine growth.??That so many jobs are currently involved in the UK oil and gas industry, is reason to take due care in any energy transition which takes place, and its timescale. It is not a reason per-se to continue piling taxpayer investment into it, if it is not just polluting but climate threatening - and in a phase of inevitable decline anyway.?It has to be standalone commercially justifiable within a carbon footprint costed landscape.?

As it happens there are plenty of other industries arising as a result of the energy transition that offer no shortage of employment possibilities.?A difference perhaps is that these are often associated with newer and/or smaller companies.?They are battling against the historical lobbying power of industries that have in the past been big employers and big taxpayers.??That is what it is, it’s to be expected to some extent.?Those groups are understandably hard for governments to ignore, nor should they ignore them – but a hard-nosed approach to the future, and to the problem of emissions is required.??This is an existential problem for the species that is being dealt with - and the priorities need to reflect that. ?

Decommissioning

Also relevant to the subject of employment is the decommissioning proposition.?Lots of work to do there.?It is a bittersweet pill in many ways, but there is a growing industry present.?As Figure 23 shows, decommissioning work was fairly negligible until about 2004, but since then it has grown steadily, to the point that it was estimated to be about 13% of the ￡12 billion annual expenditure occurring in the North Sea in 2021.??

That compares with about 3% for exploration, 31% for development, and 53% for operations. That is both the largest amount and the largest proportion ever for decommissioning. It is interesting to reflect, in Figure 24, on the time delay that has occurred between peak North Sea production and peak North Sea expenditure (2020 money).?No real surprise, it costs more effort to squeeze the later drops from the sponge, but the scale of the difference is instructive. Two production peaks occurred in the North Sea, one around 1985, but the biggest peak came later in 1999.?Interestingly the minimum post-1976 North Sea spend occurred in 2000.?The peak annual spend didn’t come until 2014, 14/15 years later and was 260% of the spend occurring at time of peak oil.?By that time production was about a third of the peak.??

Looking forward, at Figure 25, we see the decommissioning expenditure is set to remain at a similar level between ￡1.3 and ￡2.3 billion, resulting in over ￡16.5 billion spend between 2021 and 2030.?From Figure 26, we see that varies between decommissioning of 100 and 250 wells per year, with about 1800 wells to be decommissioned up to 2030.?Just under ? of that is from the central and northern North Sea, and just under 90% is from the North Sea.?So, this, in terms of work, would all seem to be OK news for an engineering and offshore job market.?It is worse news however for the oil and gas infrastructure owners, for whom this is all cost.?The portcullis gradually coming down and the end of production cashflow in. ?

The normal default mode in such a situation is to find anything that can prolong the life of the infrastructure and avoid/delay the decommissioning cost. Further gas production would fit that bill, for sure.?But note the scale of the production declines in Figure 24 and in Figure 21.?These are not trends that are about to reverse. Any new gas production in the UK is unlikely to turn around associated employment trends. It might change the rate of deceleration a bit, but that is the best that can be hoped for. That’s not nothing, but it is time for expectation management.

So just how many jobs are there?

With all this talk of jobs, just how many jobs are there in oil and gas, how is that changing year on year, and how does this compare with renewable energy industries??If we examine Figure 27 we can get a sense of this.?The first thing to note is that “jobs” related to an industry fall into three categories – direct, indirect and induced.?The direct ones are attributable to the industry itself.?The indirect ones are things that support that industry.?The induced ones are other jobs which come about simply by virtue of the money in the community resulting from that industry.?Clearly some of these things are difficult to estimate.?The statistics used in Figure 27 are displayed in Table 2 and Table 3.?While oil and gas has been quick to provide an estimate of the induced jobs, a similar renewables industry figure has been harder to find.?A factor for the induced increment roughly similar to the oil and gas industry has therefore been assumed.??

The sum of direct and indirect jobs, which is probably the most reliable figure to run with, in 2014 was just under a quarter of a million people for oil and gas.?Fascinatingly, the renewables and nuclear industry combined (predominantly renewables) was only about a dozen thousand less - even at that point.?Roughly equal in other words.?

So, has there been a massive ramp up in renewables jobs since??No, in the time to 2019, the last year for which I have found figures, the renewables direct and indirect jobs have stayed roughly constant at around 220000 +/- 20000. ?Conversely, between 2014 and 2021 though, seven years, the oil and gas direct and indirect jobs has changed significantly – going from just under quarter of a million jobs to roughly 120,000.?Halved.?A drop of 52% to be more exact.?That’s about 9% drop per year.?This is a horse that has already bolted.?

If we look at Figure 28 - again with data shown on Table 2 and Table 3 also, we see the year-on-year increase for each, and we also see the total % of the UK workforce employed in the respective sector. In 2014 oil and gas workers – direct, indirect and induced, were 1.4% of the UK workforce.?By 2020 & 2021 its about 0.55% +/- 0.05%.??Although there is a bit of a post COVID bounce in force right now, the year-on-year (yoy) decline has been typically about 15%, varying between 5-30% decline most years.?Renewable industries by contrast are fairly constant at 1.10% +/- 0.11% of the total UK workforce - and most recently at the lower end of 0.99% in 2019.??

So, while renewable industries show no evidence of taking the slack from any job losses in the oil and gas industry, it is currently roughly twice the employer that oil and gas is.?Is Ukraine going to change all that??A rising price of hydrocarbons traditionally drives up activity, and maybe provides a short term hole to fill, but the appetite for fuel switching to non-emitting options has never been greater either, and medium to long term that switch-itch isn’t going away.?

The non-combustion question – hydrocarbons are not just fossil fuels

For all this talk of decline though, we should remind ourselves of Figure 4.?We are unable to stop all combustion uses of hydrocarbons immediately without many things grinding to a halt.?That will change, but it will take decades.?And even if we do manage that, it is worth remembering that hydrocarbons are not just fossil fuels for combustion, they are a hugely versatile family of molecules used in many, many, applications that are non-destructive – i.e., petrochemicals.?

These petrochemical uses will continue.?Currently they are between 7.5-15% of hydrocarbon use.?Some of these uses will also go down, for instance as agricultural trends veer toward lower use of fertilisers, and as single use plastics are phased out - but the point is some level of ongoing global production from somewhere will continue to be necessary.?While many substitutes for plastics are being introduced, consider going a day without using any of them. More on this topic is discussed in the following article.

https://www.dhirubhai.net/pulse/hydrocarbons-always-fossil-fuels-differentiating-from-dave-waters/

The hydrogen thing

I’m not going to repeat a whole lot of hydrogen discussions here.?The two articles provided below, capture some thoughts for those more interested:

https://www.dhirubhai.net/pulse/hydrogen-logic-map-dave-waters/

https://www.dhirubhai.net/pulse/rookie-review-hydrogen-heating-dave-waters/

The thing to observe though, is that without wanting to be too cynical, hydrogen made from fossil fuels – which is how over 98% of it was made in 2020/2021 - offers a route to oil and gas producers for postponing abandonment costs and asset stranding.?That has a big incentive for oil and gas producers to encourage hydrogen’s development. Sure, there are things that need it, since it is used to make ammonia, for fertiliser, and it is used as a reducing agent in metal and petroleum product refineries.?However, the huge “hydrogen economy” suggestions involving vast new uses of hydrogen that are far from commercially mature – well, bear those abandonment costs in mind. If governments can be encouraged to use taxpayer money to subsidise big new infrastructures to make a new market for hydrogen, there are some big winners in the corridors of oil and gas production.

What about the CCS?

Similarly for CCS, that is a whole article in itself, and one is “in the pipeline” if you’ll pardon the pun.?Suffice to say for existing projects it has a role to play in mitigating damage.??Always though the real question with CCS is not how much CO2 is sequestered, but how much isn’t, especially if it is used for enhanced hydrocarbon recovery leading to further emissions down the line.??And the volumes possible for CCS by even the most favourable estimates don’t even scratch the surface of the climate targets required.?So, it is at best a damage limitation exercise and best used for existing or planned projects that have inevitable emissions forthcoming anyway.?And it is amazing that even at the stage we are at, there is still no real substantive auditing of emitting versus non-emitting usage of hydrocarbons from hydrocarbon producers. See:

( https://www.dhirubhai.net/pulse/hydrocarbons-non-emitting-usage-sell-audits-price-dave-waters ).

Planning new emitting projects on the basis that CCS will be associated with them and therefore somehow “safe”?is by contrast a dangerous fallacy.?The objective at the very least?is to obtain a balance – net zero, not to reduce the rate at which emissions increase.??Always when examining a CCS project, the key statistic is not how much is captured, but what the source of the CO2 is (existing or newly planned) and what proportion isn’t captured, over time.?We care most critically about how much goes into the atmosphere; not how much is buried. But one for another day, another article.?In our context, CCS is no licence to expand gas production recklessly. It does not change the climate crisis picture.?It only mitigates the damage somewhat of existing or imminently planned emitting projects.

Where domestically should we get it from, if we decide to go ahead?

I spent over 20 years looking at the UKCS, including the North Sea, Atlantic margin, and other frontier basins in the southern approaches, and onshore too.?That doesn’t mean my view is a definitive one – others who have done the same will hold different views.?It is however, something I have a feel for.?I have seen some of the big gas upside potentials in some of the basin’s high-pressure high-temperature fault blocks.?I have seen prospects in areas of the West of Shetland, in terms of finding hydrocarbons, almost certain to be gas.??I’ve seen some of the smaller but likely potential producers kicking around still in the central, southern, and northern North Sea.??I’ve had a look at some of the onshore shale gas wells.?I’ve seen in short, that there is still gas out there.??

Yet I’ve also been all too aware of how expensive it will be typically to monetise some of these resources. There are other big basins like the Rockall that haven’t really been tested by drilling too, but the scale of the time and effort to develop any resource in places like that – it’s just massive.??

This, at the same time that big low-cost producers are sitting on proven reserves onshore.?Typically in the hands of NOC’s, for sure, so not always readily available to the big OECD oil and gas companies.?That doesn’t mean those companies won’t have to compete with the NOC’s, they will, and some of the NOC’s can ramp up the taps at will, within the constraints of OPEC.?Maybe the scale and speed with which they can do so is sometimes overstated, but nevertheless doable.?That makes heavy investment in any new frontier resource risky even if the present-day price is on one of its periodic highs.?

However, it’s not rocket science.?As evident in Figure 29, history tells us the Northern, Central, and Southern North Seas, and the East Irish Sea, are our historical sources of gas.?Of these, the Central and Northern North Sea have typically had a commercial resource in an oil to gas ratio of 3:1 in boe terms.??That is to say mostly oil, but the oil resources have been huge, so that’s still a lot of gas – about 10 billion boe.?The East Irish Sea and Southern North Sea provide a similar amount of gas but are almost totally gas prone, virtually 100% in the case of the latter, and about 7:1 gas to oil in the former.??Other bits and pieces come from the Wessex Basin and the Faroe Shetland Basin, but these are not comparable quantitatively.?When it comes to oil and gas in a basin as mature as this, history essentially repeats.??

The best place to look for new stuff is the place where it’s been found.??Occasionally brand-new plays kick in and generate interest, like the Zechstein that is emerging now, or maybe fractured basement in the future.?However, the number of holes that have been put through these areas means that although some juicy local finds might still be lurking in some shadows, the chance of anything new contributing at a nationally volumetric scale diminishes with time.??Never say never, but…??

The giants if they still lurk in the UKCS, probably are in frontier underexplored areas, but as pointed out the cost of going there – in deep stormy Atlantic environments, when NOC’s around the world are sitting on big cheap stuff onshore – well that is a game for high price scenarios only.?How long have they ever lasted? The logistics far out there in the North Atlantic are not trivial, even in 2022.

In recent years before COVID, the number of exploration and appraisal wells per year in the UK was about 18 +/- 9, as shown in Figure 30.???Note that is both exploration and appraisal – appraisal being wells to better define discoveries already found.?Post COVID that has been in the sub-10 mark.?Expect a bit of a positive kick now the price has risen and COVID situations have improved, but not hugely so.?The firm exploration well count for 2022 so far is 6 exploration wells and 1 appraisal well, which might increase, but again not by a huge amount.?

To be fair to the amazing oil and gas province which the North Sea is, and as Figure 31 is testament to, new finds still keep coming in, some of them big.?Around well-established areas, the finding costs can still be competitive.??These are not however enough to reverse long evident trends.??

The Oil and Gas Authority in UK has put in a lot of honourable work to document possible “yet to find” resources still left in the various basins of the UK, as shown in Figures 32 and 33.??The analysis divides resource into Plays, Leads, Prospects, and Drill Ready Prospects, in increasing levels of confidence.?These are by no means certainties.?These are always estimates, and what they don’t do, and can’t do, is talk to the relative commerciality of those resources in any given time in the future.?What we do know though is that again, they will be competing with NOC’s that have large almost “ready to go” off the shelf reserves up their sleeves.?Not only that, but now there is a new appetite and competition from other lower carbon energy resources, namely renewables and to an extent nuclear.?

So, we have two choices in UK, chasing these big new relatively unknown frontier plays that have a significant amount of technical, commercial, and operational risk (i.e. weather delays) and which may or may not deliver, or keep hunting around the types of prospect and locations (plays) we already know.?The latter is where most continuing activity is.?There are better, easier places to do the frontier game.?Deep offshore Latin America and Africa prominent among them.?

However, as Figure 34 demonstrates, there is also a decommissioning clock ticking against us in these mature basins too.?The economics of developing a discovery changes dramatically in these mature regions once the infrastructure is gone.?As infrastructure from the North Sea is decommissioned, the size of new discovery required to justify new infrastructure spend will increase.??

Sometimes this problem is overstated – I have been involved in good looking exploration prospects personally where the biggest drag on development was the state of old existing infrastructure and the decommissioning liability associated with it.?It’s not impossible that once someone has done the decommissioning and removed those liabilities that some areas might open a little again.?The emphasis though, probably on a little.??

Onshore versus offshore

It’s worth also briefly touching on the onshore UK gas potential.?There are still a handful of conventional onshore gas fields, mostly very small.??There has been exploration for these too, but the resistance to new onshore developments is tangible in current public attitudes.?Onshore shale gas potential also periodically raises its head, but a combination of technical, induced seismicity, and public licence issues probably preclude any development, certainly in the near term.?Coal Bed Methane is also sometimes mentioned.?

At the end of the day, the size of any onshore potential, in any form, is not at a scale to compete with proven reserves already existing around the world.?Many of the domestic onshore options, such as the fracking required for onshore shale gas, would also involve a higher carbon footprint than conventional reserves overseas.??If fracked resource was on the table, then existing US resources, and potential in other basins almost ready to go from an LNG export perspective (e.g. Vaca Muerta Argentina), are higher up the easiness and profitability ladder.

What are the key routes for de-gassing

Without going into too much detail, it is worth noting some of the key uses for gas in 2022 and what the alternatives are.?The most obvious one many of us are used to is our domestic gas supply.?Here air, water or ground sourced heat pumps, or other solar and even wind-based heating systems, or simply electric heating, have an opportunity to replace gas.?They all involve various capex outlays for new systems, so this is not to pretend that a change is without cost, but it is possible.?

Gas is often used to provide, on-demand ,UK’s power shortfall from other means, especially when the wind isn’t blowing, or the sun isn’t shining (see https://gridwatch.co.uk/ ; https://grid.iamkate.com ; https://www.energydashboard.co.uk/live ).?Apart from reduction in demand through long term approaches to urban planning, building design, waste recycling, etc, it is only new renewable sources or nuclear or imports that can make up the difference.?Offshore wind, and new HVDC interconnectors seem likely to bear the brunt of this, with nuclear looking set to remain around 15-20% for the medium term, without major strategic changes.

Electrification of various processes is set to impact ongoing demand, as long as new power sources can indeed keep up.?A common objection in the electrons versus molecules debate is the difficulty of generating industrial scale heat for industrial processes such as cement, glass, steel, and various other chemical feedstocks.?However, as Figure 35 and 36 illustrate, there are in fact a number of low carbon and electrical routes for producing industrial heat of the temperatures and scales required.?The issue at the moment is that they are more expensive.?Let’s not deny that.?It’s a work in progress.?

Another key application of natural gas is in the steam methane reforming production of hydrogen, and from there ammonia for fertilisers.?Much of the food produced in the world today is driven by the enabling power of fertilisers.?In a way far more direct than many imagine, the fossil fuel “bonanza” of the past century and a half, and especially since 1950, has driven a human “bloom” driven by indirectly hydrocarbon supplied nutrients – much in the same way we see algal blooms in the oceans when nutrients are rich.?That is quite an issue to get around, given so much of the world is dependent on food produced with the aid of these fertilisers.?However organic and other less fertiliser intensive farming methods can help address at least some of this issue (https://ourworldindata.org/reducing-fertilizer-use ).

Price driven fuel switching

When hydrocarbon prices go up – as they always periodically do, driven by various crises or shortages, it often provokes cries that a rejuvenation of the fossil fuel business is at hand.?It will to be fair, likely cause some new production somewhere, but oil and gas is not what it was.??There is no longer a virtual monopoly of oil and gas for provision of energy.?

When the prices go up the customer may be tied for a while, but it also causes them to consider new options, and these are continually growing in number and availability.?As Figure 37 shows, in the context of recent gas price rises globally since about August 2020 (Figure 38), this has led to significant amounts of fuel switching.?It’s not the case anymore that customers just grin & bear it and take hydrocarbon price rises.? Every new cyclic phase of price rise drives more customers away.?Once able to survive without fossil fuels, the incentive to stay that way in an emissions conscious and rising carbon price world (at least in the long term) is high.??

Ethics & carbon footprint of new O&G developments

It’s one thing to talk about new oil and gas developments in mature OECD nations where the per capita emissions is very high, it’s another to preclude them in very low per capita emissions countries where energy poverty is a genuine problem.?African nations are usually selected as the case in point, but it isn’t limited to Africa.?What should be the position here then?

Personally, it seems an academic point.?When we look at Figure 39 and Figure 40, we see the per capita gas consumption and per capita emissions of countries around the globe.?African nations, and other similar low gas consumption countries, simply aren’t the problem.??It stands to follow they should be left to get on with their own energy as they see fit.?Asia, Europe, North America, and the big hydrocarbon producers of the Middle East are where the problem lies.??

Having said that, these lower gas consumption countries have a new set of choices open to them now. This sets them apart from countries which developed oil and gas when there were few alternatives.?Countries with newer relatively undeveloped oil and gas resources can choose either to use them 1) for their own benefit combustively, 2) to reserve them for posterity in longer or slower non-combustive use, or 3) to export them to others.?It might even make most sense to them to develop renewables or other low carbon routes domestically – and to pass on the oil and gas resource to countries that remain so addicted to them and will pay over the odds for them.?

Except that the emissions issue is a shared one.?We all breathe the same atmosphere and depend on the same singular interconnected ocean.?That atmosphere and that ocean determine the climatic shifts which drive our food supplies, so it’s not academic.?

Whatever the case, when they choose to use the resource domestically, it is of relatively little moment in the emissions debate. That lies firmly in the lap of the usual northern hemisphere suspects.?

What is the minimum, and how quickly to get there?

The 21st century has provided a plethora of targets on many things, not many of which have actually occurred.?Having said that I’m not going to talk in detail about what the minimum desirable production mentioned in Figure 4 actually is, it’s worth having a vague idea of the ballpark numbers people are mentioning.?People have had a go at this fairly early on. The IPCC, WFEO and COP-21 certainly had targets in mind from 2013 & 2015 and the UK’s climate change act (2008) talks of 100% net zero by 2050.?Interestingly an explanatory memo summarising that document talks of an 80% reduction target in emissions by 2050.??Taking that net zero target, or an 80% emissions reduction target – as an 80% reduction in hydrocarbon production (from 2009 levels), that sort of gives us a feel for the numbers people are talking about.?

That is with a limiting to 2.0 deg C global temperature increase in mind (relative to pre-industrial levels).?It was based on an estimated 800 GT of total carbon being extracted and burned as the limit which would trip this barrier – one which was felt to give a 2/3 chance of major polar ice collapse to a point that global cities could not cope.?That is to say, a failure limit.?Note that current economic reserves of oil and gas are about three and a half times that 800 GT number – clearly burning all of it would be a major problem.?

That’s not all the bad news, there’s worse news, because of that 800 GT we have in the industrial era since 1800 already emitted over 600 GT, so the all-time budget we have left is less than 200 GT and currently we are churning out about 36 GT/year.?To avoid this, a stalling of the global C02 concentration at around 450 ppm is deemed desirable to avoid runaway climate change (IPCC 2013):??

https://www.ipcc.ch/site/assets/uploads/2018/02/WG1AR5_SPM_FINAL.pdf

At the time of writing (March 2022) we are now at 417 ppm.?Ultimately the goal would be 350 ppm as a reasonably “safety limit” that would not cause catastrophic failures.?The uncertainties of course are that there are all sorts of runaway effects we may not know about.?Although the polar ice caps are perhaps the most physically obvious threat from warming, the changes to biodiversity and food production patterns on land and in the oceans are perhaps an even bigger threat to humanity and much more poorly understood.

Clearly with 2050 now less than 30 years away, an 80% reduction is not looking likely yet.?However, let’s keep that 80% downshift in gas and oil production in our heads, and without neglecting a need for urgency, for the sake of argument, relax the time dimension, conceptually at least.?There is a cost to relaxing the time dimension, but let’s not focus on that for the minute.

Clearly many will balk at the mere suggestion of arriving at an 80% reduction.?So, I don’t want to obsess about the number too much.?Rather than focus on that let’s just think about what it means if spread over a roughly a century of seven 15-year time periods.?The seventh root of 0.2 (i.e. the ultimate desired destination of 80% reduction = 1-0.8) is about 79.5% roughly, so we would have to achieve that amount of downsizing every 15 years for seven such periods in a row.?Going down 79.5%, i.e. a roughly 1-79.5% ~ 20% reduction, sounds a bit less scary than 80% in one bang.?Still pretty big though.?

However, it is probably the first 79.5% iteration that is the hardest.?Getting into the mindset of doing it.?Who knows, once we’ve done the first one, maybe the next six will gradually, incrementally become easier.?For those wanting more information, the details of these climate change targets and their derivation, and how an 80% reduction might be achieved - are subjects treated in more detail by Susan Krumdieck in her text “Transition Engineering”.?https://www.transitionengineering.org/book

Now many will object by saying look at the last 15 years since 2008 when that target was set – what has happened??Zippety doo-dah.?That is to be fair correct.?I think it’s pretty likely that the same might be said of the next 15 too, to be honest.?That’s because reductions don’t “happen” from will, they happen from design - and the number of countries that are actively designing long term policy, transport, infrastructure, manufacturing, recycling, demand management and product longevity for reduced energy requirements are almost zero.?

These reduction ambitions are not plans to “make” people use less energy, these are plans to help give people choices that involve less energy.?There are plenty of examples around the world, where designing for essential needs of a community can give a big part of the population choices that help to make big reductions.?These things just haven’t been realised or fully tested yet, so we shouldn’t be phased by a lack of progress in the last fifteen years.?Why would there be progress if nobody has done this??I suspect it will sink in sluggishly over the next fifteen years.?If so, perhaps the next fifteen years after that will see more progress as the world “gets it”.?The point is, if you don’t plan it, you won’t manage it.?

The overriding thing to remember amidst all this, is that we don’t actually have a choice in choosing to downshift.?The raw supplies will not keep up with “business as usual” demands even if there was no climate issue to worry about.?We will have to change whatever happens.?We can either choose to do that in a managed fashion or a chaotic one.?The chaotic option is not a case of uncomfortable, it is likely to involve severe global disorder, and likely conflict.

Domestic vs imported LNG versus imported pipeline – managing the final countdown?

COVID 19 apart, and recent Ukraine developments aside, Figure 41 shows that prior to the Ukraine invasion there was a genuine increase in the trend towards pipeline export.?What the overall motivation for that was – whether it was price, or availability, or recognition of the production footprint benefits, it is hard to say conclusively.?We have seen that this may be the easiest low hanging fruit for decarbonisation at scale of gas production.?Pipe it rather than LNG it where you can.?What we also see though is that it is the burning of the gas which always creates the lion’s share of emissions. Improving production footprints doesn’t remove that issue.?It just reduces slightly the scale of the damage.??

Similarly, domestic versus international use, can be suggested to improve things, but this is apples and pears and a very individual assessment of each case needs to occur.?Domestic footprints can vary widely with the type of accumulation.?New projects especially are less likely to be cleaner than their predecessors, as we seek the harder to get accumulations requiring greater exploration effort and new infrastructures.?

While overseas sources might be much dirtier, none of the options available happen quickly.?There may be a case that helping overseas production in prolific basins with large reserves to “clean up” - achieves far greater emissions reduction than any incremental domestic production in mature declining basins.?

Ukraine postscript

People matter more than things, and the greatest concern now in this situation is for the people of Ukraine, over and above any affected supply chains for energy or various commodities.?Nevertheless, it is also impossible not to contemplate the impact.?Clearly the prospect for any major role of Russian gas in future production footprint improvements, particularly via pipeline, is now dramatically reduced.?Even if the conflict ends soon, any appetite for a return to past levels of dependency is totally gone.

Some things have changed dramatically as a result of the invasion, others have not changed at all.?There are two separate situations, two separate crises.?One is to fill the short-term energy hole left by any turn from Russian dependency.?A situation that has changed almost everything overnight.?The other is the long-term climate and emissions issue that has not changed at all.?An imperative is to not confuse the two or to abandon either.?Neither to be distracted from one to the negligence of the other.???

The question much of Europe now faces, is what next??A key thing to recognise is turnaround times.?Frankly the readiness with which everyone has instantly been panicked into overdrive on ramping up oil and gas production betrays the poverty of imagination and commitment, for all the talk, that has really been deployed in energy alternatives over the past decade. ?The UK has made progress for sure, but now is not the time to be going retrograde at the first sign of gas stress. Rather use it as a propellant for change.?Sure, a short-term crisis to be dealt with, but don’t panic.?Keep the imagination and the creativity alive.

Whatever the alternatives, be they from gas or other energy sources, none of them can happen very quickly, and very few can provide options measured in months rather than years.?The most obvious stop-gap increase likely involves ramping up as far as possible any domestic production that is already present or increasing production and exports from existing LNG producers.?None of these though are instant.?Ramping up production, as just one example, may have implications for pressures and ultimate recoveries amongst other things.

Longer term, there are options provided by new pipelines, and some options (e.g. Algeria) have been discussed already.?Yet it is hard to not also envisage that the kind of fuel switching we see from Figure 37, will now happen even more intensely.?Alternatives to gas for energy will be reviewed with a far greater intensity than previously.?

Of course, where countries like the UK have a history of gas exploration and a sense of as yet undiscovered and undeveloped resource, this will come under new spotlights too.?However, the scale of the turnaround that is required to do these things should not be underestimated.?Talent pools have vacated the room, and infrastructure has decreased.?Appetite to return from those who were once in the industry, even if it could be done quickly - is not unanimous by any means.?

The resources that are out there still are by definition the harder, more expensive ones.?The reasons for that vary.?It can be a social, operational, technical reasons that impact them.?Many are still no doubt possible, but the scale of effort to access that resource is mammoth.?At the end of all that effort we know that the resource is still finite, in decline, and will one day require replacement.?The question then, of “why not start now” when it comes to reducing oil and gas dependence is not an invalid one.?

Whatever your own view on the “best” option is, gas in a NW European setting now has to compete with offshore wind, air or ground sourced heat, and new nuclear, as the alternative options providing greatest scale.??Interconnection with more distal solar perhaps another longer-term option, assuming countries in North Africa wanted to export.?

If however, some gas continuance is assumed, the question of domestic versus international is not a cut and dried one.?Where any international source is “dirtier” there may be some obvious improvements possible such as less flaring, addressing pipeline leakages, or more long-distance pipelines.?However, there may be a unbustable floor to those kinds of improvements, especially where the unavoidable refrigeration needed for LNG is involved, or where the energy investment in fracking unconventional sources is involved.?

If not Russia, where?

With those considerations in mind, excluding Russia itself, where are the big remaining undeveloped gas resources sitting??Figure 42 shows the BP 2021 statistical energy review estimate of proven gas reserves in countries of the world, and Russia holds a disconcertingly large amount of it – about 20%.?Another nine countries, each with proven reserves larger than 5 trillion cubic metres - hold another 60%. They are in order of importance: ?Iran, Qatar, Turkmenistan, US, China, Venezuela, Saudi Arabia, United Arab Emirates, Nigeria.?Anyone looking for a swathe of geopolitically secure issue free countries to come galloping over the hill, is going to be disappointed.??

It is important to stress though, that this is only proven reserves, and vast amounts of probable and possible resources sit out there too.?Apart from in the same countries as above, where the lion’s share is also likely to sit, Figure 43 is a nice summary of where people are looking in 2021 and 2022.?The deep-water African and South American margins loom large, as does the deep US and Mexican Gulf of Mexico.??

Unconventional gas resources of course changed the paradigm of energy in the early 21st century. Could it do so again elsewhere??Well a lot of people are saying so, but with a few exceptions, the places where it really could take off tend to be back in the usual suspects.?Figure 44 and Figure 45 show results of an assessment from 2016.?Probably the most interesting from a European gas supply perspective would be existing frackers in the US and Canada.?Algeria and Argentina can be prominent additions to the group, if new shale gas regions were the objective.?Iran, Saudi, and Qatar also have lots but then they still have lots of conventional resource ahead in the queue.??

In Europe itself Poland has some resource, but efforts to exploit it by ExxonMobil were abandoned for multifarious reasons, and similar efforts in northern England have foundered – mainly for social licence reasons.?But these volumes do not compete volumetrically at any level with those in Algeria and Argentina, or for that matter south-eastern Africa.?A good review of the global context of European unconventional gas, and the obstacles, is given by Michael Stephenson (https://onlinelibrary.wiley.com/doi/full/10.1002/ese3.96 ). For all the real differences in geology, the real bust has been population density and related social licence issues.?

In short, for all the turmoil that the situation in Ukraine has thrown the world's gas supplies into, it transpires that there are very few options for Europe that do not involve imports, and for the most part, with the exception perhaps of places like Canada and Argentina, the imports would be from those who are already engaged in gas exports to Europe – notably the Middle East, North Africa, and the US.?

Ultra long-term resource access and how much we value that

Amidst all these arguments, there is a thing to remember and that is that hydrocarbons are not a limitless resource.?The time take for them to be created naturally involved many millions of years.?They aren’t coming back again in a hurry when we burn them up.?So there is an element of maybe we don’t want to burn up the hydrocarbon resource we have today as fast as we can.?Maybe we might actually want to save some, not just for tomorrow, or a rainy day, but for future centuries, or millennia.?

But do we??It is a serious and not flippant question.?How much value do we attribute to people centuries and millennia from now having access to some hydrocarbons to play with??Is there really a proposition where we find some big new hydrocarbon resources and choose not to use them immediately???

It’s not the intention here to send us all on guilt trips, but it is a genuine question isn’t it??Do we care about our descendants’ lives centuries from now??If we do in this hydrocarbon “bank” context, there is very little evidence to show for it so far.?With the possible exception of Norway’s sovereign wealth fund, it has been a pretty consistent case of withdrawal as soon as you can.

In summary – a personal take

I began this article by positioning most of us at a vertex of the triangle in Figure 4.?Namely that most of us recognise a need to reduce hydrocarbon combustion in the interest of emissions reduction but recognise there would be some timescale needed to achieve this.

Over the course of this article, I have examined what arguments there are for reducing gas production footprints, and what the merits of various routes are.?However, there is no escaping that a gas production carbon footprint is just that – the footprint resulting from making the gas.?The carbon footprint of burning the gas however, is larger and irreducible.?

The production component of the carbon footprint varies at least tenfold between the best and worst carbon footprint production, but even in the worst cases, the production footprint is only about half the total footprint (in terms of kgCO2e/boe – Table 1b).?In the average European LNG import case the production footprint is between a fifth and a quarter of the total footprint (Table 1b).?In piped gas the production footprint is about a tenth to a fifteenth of the production footprint (Table 1b).??

Yet the usage footprint is the same in all these situations, and the total improvement that can be obtained from changing production style to a lower piped or domestic one is in the range of only 2-30%, and for the average LNG import situation, about 12%.

There may be even worse instances globally, or even within Europe, where the production footprint is larger but that does not represent any reduction in the footprint of burning the gas, just an increase in the footprint of producing it.

There is opportunity to reduce carbon footprints by reducing leakage and flaring, and replacing LNG export with pipelines as possible, but these are in the end, tweaks on the core issue of burning the gas.?That footprint can never be bypassed in a combustive use of gas.?If the issue is net zero emissions therefore, this is not something to be addressed by production footprints, or by comparing various modes of production, domestic, international, LNG, piped.?The way to address that issue is to stop burning gas.?

That is not to belittle the importance of reducing the production footprint where we can – in damage limitation.?But it is to not kid ourselves that addressing production footprint alone is in any way addressing the core emissions and climate issue - the impact of changing climate on a world that has never had the population density and infrastructure vulnerability it does today.???Bigger climate changes may have occurred in geological time, but never with 7.9 billion mouths to feed.

I make no presumption here that drastically reducing our use of gas in combustion can happen easily or quickly.?The practicalities of how to make that happen is a different topic.?However, what we cannot do is pretend that improving gas production footprints in any way makes a significant impact on concerns around anthropogenic global climate change.?To address that, combustive usage of gas must be reduced as much as we can as fast as we can.?The production footprint of its manufacture, however that can be optimised, in such a context, is a sideshow and a distraction. To justify any new domestic gas developments on that basis is not an obvious argument given that encouraging exporters to clean up their act would likely have a greater impact.?

The non-combustive use of natural gas has an assured future even as combustive uses steadily decline over decades.?Companies that are involved in gas production do well to differentiate their combustive and non-combustive customers, in order to set and reach targets, and to reassure the public that such reduction is being measured and taking place. Strong reductions in the emitting use of hydrocarbons do need to happen, and short-term issues notwithstanding, now is not the time to backpedal.?