Oil and Gas Investor At Closing: New Year’s Eve, 2050

Presented by:

[Editor's note: A version of this story appears in the July 2021 issue of Oil and Gas Investor magazine. Subscribe to the magazine here.]

You could laugh at all the scenarios, pledges—and fights—about getting the world to net zero by 2050. An admirable goal that all industries, governments and consumers should pursue, yes. But that is 30 years away, a full generation. Who knows what will ensue between now and New Year’s Eve, 2050? Did anyone foresee the iPhone, SpaceX, an electric Mustang, the Peloton, drilling a 12,000-ft horizontal through shale or Phil Mickelson winning another major?

Most of us who really understand where energy comes from, how it is stored, transmitted, scaled-up, made commercially viable—well, sorry to inform you, but we’ll be gone from the Earth in 30 years.

The task before us is enormous, exciting and threatening at the same time. Solutions abound; some are questionable. Last March, Rystad Energy pointed out that if we were to reach net-zero emissions by 2050, “the significant utility solar PV installed capacity required to meet the target would occupy around 13,412 square miles of land … roughly 50 times the size of Austin, Texas.

“Land scarcity is often cited as a key barrier to ramping up solar and wind energy capacity in the U.S., thus undermining the country’s revitalized decarbonization ambitions for the next 30 years,” Rystad said. “Solar farms, in particular, require a lot of real estate and, unlike wind farms, could take land away from agriculture or other uses.”

The Wall Street Journal reported that some environmentalists have begun to oppose large-scale solar farm sites, since they could possibly destroy the nesting habitat of certain endangered tortoises. You just can’t please some people.

We should be asking the right questions about these topics and scrambling hard to find the right answers. That means more R&D and more collaboration across companies, industries, academia, think tanks, banks and governments. Come on, all ye eccentric and brilliant visionaries like Elon Musk, Jeff Bezos or Sir Richard Branson. We need all of the above.

Even if global warming is not a bad thing and is instead part of a natural cycle that repeats every 300 years, and even if we cannot actually change global weather patterns (the arrogance of technology!), we can do more to improve air quality, ease congestion in huge urban areas, keep the waters clean and preserve habitat for animals and birds. No question.

The industry with the solutions is under assault from all sides. You might have missed this item, but in January S&P Global Ratings lowered its credit ratings for Exxon Mobil Corp., Chevron Corp. and ConocoPhillips Co. due to the risks it sees in climate-related pressures on them.

The University of Pittsburgh, in the heart of Marcellus country, said it will phase out all its fossil fuel-related investments by 2035.

Industry responses are encouraging, but we won’t know for decades if they are realistic and achievable. The courts bullied Shell, but not into submission. The major will appeal the ruling, all while continuing to work on its own timetable for going green. Shareholders bullied Exxon Mobil, but it proposes to capture CO₂ from polluters along the Houston Ship Channel, and channel CO₂ to EOR oil fields. Smart.

We’re seeing lately in several press releases the emergence of new buzz words and corporate branding: The net zero barrel. Responsibly sourced natural gas.

Exciting examples keep coming. Talos Energy unveiled a joint venture about carbon capture and storage.

In Alberta, oil-sands producers Cenovus, Suncor, Imperial, Canadian Natural Resources and MEG Energy have formed an alliance to do more on carbon capture while producing oil, the Oil Sands Pathways to Net Zero initiative.

“Every credible energy forecast indicates that oil will be a major contributor to the energy mix in the decades ahead and even beyond 2050. Alberta is uniquely positioned and ready to meet that demand … ultimately leading to the production of net-zero barrels of oil,” said Sonya Savage, Alberta’s Minister of Energy.

President Biden is reportedly privately strong-arming big banks to refuse to lend to or invest in coal, oil and gas companies. But more than a dozen state treasurers (15 to be exact, and including some you might not expect, such Idaho and South Carolina) will fight back.

In a letter led by West Virginia Treasurer Riley Moore, they said, “We strongly oppose command-and-control economic policies that attempt to bend the free market to the political will of government officials.” It’s not in keeping with a capitalist democracy, the letter said. Let the markets, let the people, decide who the winners and losers are in energy.

Further, the treasurers threatened to push back, denying banks their business. “We will give weight to what banks do…before we enter into or extend any contracts.” The plea is to not cut off dollars for law-abiding industries that provide jobs and revenue for state responsibilities like education.

The ramifications of a different energy future are up in the air. It’s up to all of us to start figuring out what to do now.