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Big Oil's Irresponsible Energy

Big Oil's Irresponsible Energy

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Published by: Protect Florida's Beaches on Jul 09, 2010
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07/09/2010

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 Tis brie summarizes our analysis o the carbon intensity o the top international oil companies. It revealsthat Shell has become the most carbon intensive oil company in the world based on its total resources. When Shell’s total resources are taken into account, the amount o greenhouse gases (GHGs) emitted perbarrel o oil equivalent produced will outstrip those o its nearest competitors. Te data shows that in the ageo carbon reduction, Shell is ast heading in the opposite direction, massively increasing the carbon intensity o its production o oil and gas. Tis presents real risks or Shell, or investors, and or the climate.
Key Conclusions
 
1) Shell holds more carbon in itsresources, per barrel o uture oilequivalent, than any other majorinternational oil company. It isthereore the world’s most carbonintensive oil company;2) Te average carbon intensity o each barrel o oil and gas Shellproduces is set to rise dramatically,increasing 85 per cent on today’sgure;3) Tis sharp increase is causedby Shell’s move into tar sands, itsreliance on liqueed natural gas(LNG), and its continued gas ar-ing in Nigeria;4) Shell is thereore more vulner-able to carbon pricing and subjectto greater carbon risk than itspeers.
Company2008 ProductionTotal ResourcesPercentageIncrease
Shell 
33.862.685
Chevron
38.852.836
ExxonMobil 
40.644.710
BP
31.036.919
Units in Figure 1 above and able 1 below are average intensity o kilograms o carbon dioxideequivalent emitted per barrel o oil equivalent produced.
Shell’s green image still benets the company, and the company wins praise or its words expressing aware-ness o and concern or climate change. But the reality is that Shell has chosen the most carbon intensiveand climate changing path orward. Climate science reminds us that global greenhouse emissions need topeak by 2015 and come down to at least 80 per cent o 1990 levels by 2050 in order to prevent the worstimpacts o climate change. Given this, using ever greater quantities o energy to produce billions o barrelso otherwise inaccessible oil appears to be a strategy or disaster. It appears however, to be Shell’s strategy.
Irresponsible Energ
Shell: he World’s Most Carbon Intensive Oil Company
 
Te carbon intensity of major oil companies
Not every barrel o oil has the same carbon ootprint. When a barrel o oil is produced, the amount o carbon emitted during its production varies signi-cantly. Tis depends on actors, such as the depth andpressure o the reservoir, as well as the attributes o the oil, such as its viscosity and gravity. In addition,oil is oten extracted with gas, known as ‘associatedgas’. I this gas is ared, as is common in Nigeria,the amount o greenhouse gases emitted radically increases.International oil companies, like Shell, ace a grow-ing problem o nding sources o conventional oil.Much o the “easy oil” has already been produced oris controlled and exploited by countries such as SaudiArabia. Te decline o oil elds in the Middle East,North Sea, North America and elsewhere, as well asthe resource sovereignty exercised by governmentsall over the world, means that access to oil reservesor Shell has declined sharply. In the 1970s interna-tional oil companies controlled around 70 per cent o reserves. oday that gure is close to 10 per cent.
1
 Te oil industry has to look beyond conventional re-sources o oil to maintain supplies. In its Sustainabil-ity Report, Shell concedes that,“conventional sourceso oil alone will struggle to meet growing demand”.
 2
 In order to maintain the production o oil and gas,companies have developed technology to accessreserves that were previously inaccessible. Deepwater,tight gas, shale gas, liqueed natural gas, enhancedoil recovery and tar sands production are all exampleso how the industry has developed technology toaccess more oil and gas rom the decreasing pool o hydrocarbon reservoirs they have access to. Tere is a undamental problem or the industry though: all o these orms o production are to di-erent degrees more energy intensive than traditionalmethods. For example, injecting steam into a tarsands reservoir in order to get the tar to ow to aproduction well can emit up to 135 kg o co2 perbarrel o oil produced.
3
Extracting conventional oilin Saudi Arabia on average emits only 13.6 kg o co2per barrel.
So as the industry moves urther towardsunconventional oil, the emissions associated witheach barrel will dramatically increase.In act, gas aring in the production o oil in Nige-ria and the energy-intensive extraction o tar sandsare two o the most carbon intensive orms o oilproduction (see Figure 2). Te liqueaction and re-gasication processes involved in producing liqueednatural gas (LNG) which enables it to be transport-ed by tanker are also typically highly energy intensiveand thereore constitute a markedly carbon intensive way to produce and deliver natural gas.
Shell is aleading producer o both tar sands and LNG, and isthe largest oil operator in Nigeria.
Figure 2 - Oil’s contribution to global warming varies, depending on where, and how, it was extracted.
Source: US Department of Energy, National Energy Technology Laboratory, March 2009
 
Greater Vulnerability to Carbon Pricing 
As concerns over climate change have risen up thepolitical agenda – with many countries now enactinglegislation to regulate carbon emissions – the invest-ment community has started to analyse what risks acarbon-constrained world could pose to oil and gascompanies.Shell admits it has a problem in its latest Sustain-ability report, saying “
Our upstream energy intensityhas risen by around 27% since 2000 as felds age and more heavy and harder-to-reach oil is produced.” 
6
 In September 2008 the Global Research Depart-ment o HSBC produced a report, ‘
Oil and Carbon’ 
,in which it analysed the top European oil companies’potential exposure to legislation on carbon and car-bon pricing. Te report notes Shell’s increasing moveinto carbon intensive tar sands and increasing LNGproduction. It concludes that Shell’s
“above average exposure to carbon intensive projects leaves Shell more vulnerable to carbon pricing than its peers” 
.
 
otal Resources Analysis
According to HSBC:
“the most commonly used mea-sure o reserves, proven and probable, is a probability-weighted assessment o a company’s reserves. Tis … un-derstates the level o a company’s potential reserve base.…it does not capture some companies’ unconventional reserves as many have only potentially become commer-cial in the past 12 months as the oil price has risen…Analternative measure, ‘resources’… is a much wider assess-ment and is an estimate o the total potential reserves or a company. Tis measure will capture a higher proportiono unconventional energy sources including oil sands,heavy oil and tight gas.” 
 We agree with HSBC that a total resources measureis more indicative o a company’s total carbon pro-le, and thereore we have used that measure in ouranalysis.In March 2009 the National Energy echnology Laboratory, (NEL) part o the United States De-partment o Energy, reported on the huge range incarbon intensities or oil production, depending onlocation and extraction method.
9
Figure 2 (above)shows that oil rom Nigeria (because o the associ-ated gas aring)and Canada’s tar sands top the listor the carbon intensity o crude oils processed in USreneries.
Our Analysis
Company disclosure o total resources rom annualreports and strategy presentations were analysedusing the NEL carbon intensity gures in gure 2along with intensity estimates or other orms o oiland gas production drawn rom the HSBC report.
10 
  We applied these carbon intensity averages to therelevant percentages o the resource base disclosed by each company and derived a weighted average.
11
  Te 2008 gure we used or comparison with currentproduction is drawn rom a carbon intensity analysisconducted by rucost in April 2009.
12
  able 1 (cover page) reveals that based on reportedtotal resources, Shell’s production o oil and gas willbecome the most carbon intense o its peers. It willrise by 85 per cent rom today’s gure – an increasemarkedly greater than its competitors. Tis sharprise is due to Shell’s total resources being dominatedby unconventional and heavy oil (34.7 per cent)and LNG (16.9 per cent), as well as Shell’s ongoingreliance on Nigerian crude with its associated gasaring. Other companies, while showing an increasethat is also o concern, have not staked such a signi-cant proportion o their uture production on thesecarbon heavy resources.Shell’s uture dependence on carbon intensive,unconventional oil is illustrated succinctly in itsdisclosure o total resources rom its 2008 strategy update.
13
O the 66 billion barrels o oil equivalentrepresented in Shell’s 2008 chart o total resources,22.9 billion is heavy oil and enhanced oil recovery. We know that 20 billion barrels o that is tar sands
14 
, which thereore constitutes the biggest single portiono Shell’s resources, a ull 30 per cent o its utureoil and gas production. No other oil company hasstaked so much o its uture on the dirtiest orm o oil production.Shell also has major research and development inoil shale extraction, which does not yet actor intothese resource estimates. Shell’s oil shale extractiontechnology emits between 176 and 292 kilograms o carbon dioxide equivalent per barrel o oil equivalentproduced. (kg-co2e/boe).
15 
Shell is also aggressively seeking oil shale and tar sands production opportu-nities in Russia and Jordan.
16

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