And in a report published by the site “BloombergAmerican writer Laura Horst said, given the role that the Corona crisis has played in accelerating the global shift towards renewable energy, the price of fossil fuels is likely to become cheaper than expected in the coming decades, while releasing the carbon it contains will become more expensive. These two simple assumptions mean that exploiting some fields is no longer economically rational.
The oil industry was already suffering from the transformation in energy, abundant supplies and indications of a peak in demand when the “Covid-19” virus began to spread.
According to Rystad Energy, the epidemic is likely to trigger that peak and oil-producing companies to stop exploring again.
The company’s advisor expects that about 10% of the world’s recoverable oil resources, or about 125 billion barrels, will become unusable.
The “Sea Lion” project in the Falkland Islands promised to become one of the most important sources of oil extraction in the world when exploration company “Rockhopper” found the field in 2010.
Even after spending hundreds of millions of dollars and after the project suffered from a conflict between Argentina and Britain over its legitimacy, the first phase of it did not bring any oil to the market. As a result, Premier Oil, a partner of Rockhopper, suspended work on the project at a time. Earlier this year, on July 15, it canceled a $ 200 million investment.
The larger companies are also beginning to express their awareness of the unclear future of other projects. BP said in June that it would evaluate its own set of discoveries and stop developing some of them.
On the other hand, pressures to reduce carbon emissions may also push companies not to extract the reserves that contain the largest percentage of carbon, as the French company Total announced last month.
Projects are more at risk
According to Barol Chopra, an expert at Rystad Energy, the list of projects most at risk includes deep-water discoveries off Brazil, Angola and the Gulf of Mexico, and Chopra considered that Canadian oil sands projects – such as the expansion of the “Sunrise” project in Alberta – are considered Also questionable.
The “Sunrise” project was supposed to be implemented in three phases, eventually resulting in more than 200,000 barrels of asphalt per day over a period of 40 years.
The first phase, which is supposed to produce 60,000 barrels per day, began in 2015, at a time when crude prices were declining, amid the first shale oil boom in the United States.
Since last March, production has shrunk to about 10,000 barrels per day, amid low prices and restrictions imposed on the pipeline’s capacity.
In addition to their economic viability, carbon-rich oil sands are not in line with BP’s ambition to become a “net zero emissions” company by 2050, and a British Petroleum spokesman said the company is reviewing oil sands projects.
The writer added that in the Falkland Islands, there is still hope that the expectations will improve, as the Rockhopper Company says that the challenges are not insurmountable, despite the remoteness of the islands and the hostility of Argentina, which fought a war with Britain in the eighties and is still claiming sovereignty over the territory.
According to Premier Tony Durant, the final decision on whether to proceed with the “Sealine” project in the Falkland Islands will not be made until next year at the earliest.
For its part, Rockhopper said that the “C-Line” project needs to reach at least $ 50 a barrel to secure its debts.
Ultimately, with abundant oil, doubts about the ability of long-term demand and pressure to eliminate energy sources that contain high levels of carbon, conditions are increasingly working against projects such as “Sunrise” and “Sea Line”.