Your Carbon Future

Your Carbon Future

For at least a decade and a half I have been taking time at the end of the year to reflect on the state of the global energy industry.??This year I wish to touch on a simple theme, that we, collectively as a planet, are carbon based life forms and everything that we do revolves around this most basic of elements.??When we have discussion about food sources, whether for our holiday table or how to feed millions in food poverty, we are talking about how to feed our internal carbon engines.?When we discuss electrifying our transportation system, more than electrons we are discussing the optimum methods of using carbon to generate, move, store, and put into motion those electrons. ??When we try to come up with solutions to either mitigate against climate change or to hold back the tide of climate change, we are really discussing how best to use our carbon resources to advance our objectives.

Whether the conversation is about meat, grain, your favorite spirit, cars, planes, power stations, wind farms, solar panels, transmission systems, or batteries the conversation is based on carbon whether you know it or not.?Take carbon out of the equation for any of the above and all conversation ends.?You can not have any realistic discussion on climate change without include carbon in the discussion and I am not just talking about a “carbon tax” for if a true tax on all carbon was put in place all industry would completely stop.??Every piece of steel now used is an alloy with carbon, including the towers for the windmills and the frames for solar panels.?Every base of the windmills are concrete, made of carbon with calcium and oxygen, and the blades are carbon fibers. ?Every solar panel is made with carbon backing the silicon surface.?Every battery uses carbon in its core.?Every electric vehicle is made primarily of plastic which is a carbon compound.??

Carbon is used in almost every medical compound and in the delivery systems of every medicine from syringes to pill coatings.?Carbon is in the hospital gowns, masks, sheets, floors, ventilation, and almost every surface; be it glass, steel or plastic.?Our entire life support system on this planet is based on carbon so how did carbon get into so much trouble and get labeled as a “toxic pollutant” that is destroying our planet??Why is “decarbonization” the buzzword of choice in all investor presentations? ?The answer is dreadfully simple and something that every geoscientist that has worked for a company of any size has seen happen.??Once a manager, without a technical background, gets a brief and they believe that they can then answer any relevant question on the project things can spin rapidly out of control.?With climate change relatively simple models were used to answer a question of “If everything that we currently know about the earth’s climate stays the same – what would be the effect if we continued putting carbon dioxide or methane (CH4) into the atmosphere?”?This is a reasonable question and the models gave a prediction.?However, we did not, and do not, know all we need to know about the earths climate and also, even those things that we do know are not staying constant.?This is why the model(s) have shown themselves for over 20 years to be incorrect and to always be overestimating the earth’s heating.?This is not to say that the earth is not heating (it is) nor that the CO2 and CH4 that we are putting into the atmosphere is not increasing the heating (it is) but the amount of both is still under considerable debate.?It just became simpler for politicians to use the models to push their agendas, irrespective of the science; they don’t have to understand the models or what they actually are saying as long as the headline looks good.

Thus, they first attacked the coal industry in Europe and North America (take note of where the attacks come), then the oil industry, again in Europe and North America, and finally the agriculture sector (which I predicted in 2016).??The attempts to close down the industries come in the developed world where A) activists are allowed the freedom of protest, and B) most companies of any size are public companies and can be influenced by public protests.?In the developing world many of the freedoms to protest are not available and the coal and energy companies are nationalized so protests will not have significant impacts.?Politicians there often tend to not raise “Green” protest voices against the ruling governments.

To obtain all of the carbon needed to continue our life, as we know it, we need to understand what resources are being used.?The worlds number one resource of carbon is coal, which is nearly pure carbon mined directly from the earth.??However, the mining of coal releases enormous quantities of methane and the burning of coal, either for energy or for transforming it into other forms of carbon releases large quantiles of CO2.??A second resource is plant material, whether primary as in the fruits, vegetables, and grains we consume or secondary in the meat we consume after the cow, pig, chicken, or goat has consumed the grain.?Some of this form of carbon ends up as commercial non-food product including natural textiles, paper and cardboard, and building materials . Planting trees to “sequester” carbon, that is to pull it out of the atmosphere to lock it up in the wood, only sequesters it as long as the wood is either still a tree or the wood product is used.?Once it goes to a landfill or is recycled the carbon is returned to the atmosphere in the form of methane.??The third largest resource is hydrocarbons, gas and oil.?The carbon in oil and in natural gas is chemically easy to break apart and recombine with other chemicals making oil and gas the natural feedstock for millions of products that we use in our daily lives.?All forms of plastics and rubber use oil and\or natural gas in their manufacture; from smart phones to Teslas, from kitchen counters to reusable grocery bags, from the coatings of millions of miles of wires connecting solar panels and wind farms to the electric grid to the insulators scattered around the grid.?No form of “green energy” can operate without hydrocarbon products.?Oil and gas can, and have operated without green energy however more and more operators are adapting to ways to integrate solar energy into their systems in order to reduce overall emissions.

I have at last come to the point of this years essay, that no matter what any politician promises you there will be a need for the oil and gas industry for many, many decades to come.?It is not a dying nor a sunset industry.??It is an industry that has always been innovative and adaptive to change. ??Our technology has changed, our workplace has changed and our workforce has changed; I think all three have changed for the better.?Over my career I have changed from development to exploration and back again too many times to count.?I have had the opportunity to train as a geophysicist and put that training to excellent practice but spend most of my time working on reserve and resource reports.?I had to train myself to unconventionals when they were cutting edge and I ended up teaching industry courses in them for the industry leader in professional education.?Recently I have found over half of my work in the exciting world of helium exploration and production.?After over forty years in the industry I am learning new things every day and working just as hard to keep up with technology as when I started; B.C. (before computers). Change is constant in this industry and the industry is constantly changing.?Embrace change by being willing to learn and to adapt.

As we look forward to 2022 there are several key factors that are shaping the upcoming year.?Demand for oil and gas is increasing, coming back to it’s normal 3-4% annual increase yet last year was, according to Rystad Energy, the worst on record for the past twenty five years for discovering new hydrocarbon resources. ?The US Federal Reserve out of Dallas, TX annual survey of operating companies finds that next years budgets will overwhelmingly focus on increasing production as opposed to improving cash flow as in the past two years thus expect to see a rise in US production but a decrease in overall known reserve base.?Globally Russia is showing that it is willing to use natural gas as a political tool in Europe just as effectively as placing 100,000 troops along the Ukraine border.?For most of the past two years it has found agreement with Saudi Arabia on oil production and as long as demand slightly outstrips supply and prices slowly rise, they will most likely keep OPEC+ in line with the will of OPEC.??We are just now beginning to hear analysts warnings of $100 plus oil prices thus those who have been in the industry long enough realize it must be time to start planning for some rapid falls in oil prices. ?Volatility in oil prices will remove incentives for companies to commit capital for exploration thus, in the long run, exacerbating the difficulty of supplying the world’s need for oil and gas. ?Thus, it won’t be an easy ride but for those that can stay in the saddle it will be worth the trip.

Keep it turning to the right,

Jeff Aldrich

December 29, 2021