| 摘要 | 1. Research Purpose
Environmental issues, including climate change, are increasingly gaining attention around the world with the increased frequency of abnormal weather events and related damages. In 1992, the United Nations Framework Convention on Climate Change was adopted, setting a framework for global responses to climate issues. In addition, developed countries, including EU member countries, have introduced a raft of policies to curb greenhouse gas emissions. Accordingly, the energy sector, the biggest emitter of greenhouse gases, has faced new hurdles and so have fossil fuel-related areas including oil, natural gas and coal. Resource development industries for production and supply of energy sources for fossil fuel have also confronted with unique challenges stemming from weather condition changes due to climate change, regulatory restrictions and tougher competition in research fields for novel technology development including renewable energy sources. In a nutshell, resource development industries have encountered with new risk factors, including oil demand contraction, capital expenditure and operational cost growth, production capacity reduction and operational disruptions on top of the existing risk factors in regard to exploration, production and price. Also, resource development industries, in common with other industries, have to deal with physical changes in climate including sea-level rise, hurricanes, typhoons, tropical cyclones and changes in precipitation levels. The international community has not come to terms with effects of the ongoing climate change on resource development but it is forecast that climate change will have increasing influences in resource development. Today, the number of marine resource development projects, which are relatively more vulnerable to climate change, is on the rise. Developers are increasing production of non-conventional resources, including shale gas and oil sand, which use a large amount of water in production and emit more greenhouse gases than conventional resources. Enhanced oil recovery using water is also in the spotlight. Against the backdrop, the international community should announce more pledges for greenhouse gas emission reduction in resource development and perform a full evaluation and management of risk factors and opportunities that come with climate change. Risk management is particularly imperative in resource development projects because most of projects complete after 20-30 years and payback period takes up 10-15 years. In this regard, this research aims to review the current resource development areas through an analysis on climate-related risk factors in resource development and major resource developers�� understandings and responses. However, we have not applied a quantitative analysis due to uncertainties in climate change regulations and difficulties in forecasting the frequency and magnitude of extreme weather events driven by climate change.
2. Summary
Oil and natural gas emit greenhouse gases when they are consumed as fuel for electricity generation, transportation and other industrial activities. Exploration and production of oil and natural gas are also culprits behind greenhouse gasses because gas turbines, diesel engines and boilers consume fuel. Vents, thermal oxidizers and equipment leaks during exploration, production and processing are also responsible for greenhouse gases. To sum up, the main emitters of greenhouse gases during exploration and production of oil and natural gas involve fuel consumption, vents, thermal oxidizers and equipment leaks during gas burn-off and fuel burn processes.
Traditionally, production of conventional crude oil does not require a large amount of energy supply, and thus greenhouse gas emissions are limited. On the contrary, conventional crude oil production in ultra deep sea and the Arctic region requires capital- and energy-intensive facilities, all contributing to the increased greenhouse gas emissions. The same goes for production of conventional gases and light and heavy crude oil, which undergoes similar development processes. Development and production of non-conventional oil, including heavy oil and oil sand, and non-conventional gas, including shale gas, involve much complex and multi-step procedures, which are the reasons why production of non-conventional energy sources is blamed for far more greenhouse gas emissions than conventional energy sources. Shale gas, like oil sand, is trapped in shale rocks, a reservoir of natural gas. For the extraction of shale gas, developers apply horizontal drilling to open an access to a vast gas reservoir and hydraulic fracturing to pump liquid underground. On top of that, more drilling wells should be in place for shale gas compared with conventional gas production. Aforementioned procedures and techniques are all responsible for the increased greenhouse gas emissions during shale gas production. In addition, energy burn, diesel engines, vents and fugitive leaks have also contributed to growth in greenhouse gas emissions per unit production of shale gas.
Upstream oil and natural gas production is estimated to have emitted 1.1 greenhouse gases in 2011 and accounted for 3.5% of the total greenhouse gas emissions in the energy sector. Non-conventional resources, which carry relatively higher greenhouse gas emission intensity, remain low in emission proportions because crude oil production largely depends on conventional energy sources. However, according to the new policies scenario by OECD/IEA (2014b), greenhouse gas emissions in upstream are forecast to rise on the back of growth in greenhouse gas emissions per unit production in upstream if non-conventional resource production grows significantly. Greenhouse gas emissions per unit production in upstream oil and natural gas areas grew 0.5% annually in 2002-2012.
The fossil energy sector, including oil and gas, faces new risk factors due to growing supports for stricter carbon regulations around the world in its battle against climate change. Climate change regulations associated with greenhouse gas emission targets, emission trading scheme, low-carbon fuel standards, renewable energy and energy efficiency improvement will change oil and natural gas demand and boost operational costs, adding burden to developers. Based on climate change reports of CDP, major oil developers, including ExxonMobil Corporation, Royal Dutch Shell (hereunder referred to as Shell), Chevron Corporation and Eni SpA, expected that new policies and regulations in relation to climate change would bring significant impacts on their business operations and balance sheets, and those companies have reflected changes in the energy landscape in their investment portfolios. However, for some time, climate change regulations will have stronger influences on oil and natural gas demand, and their impacts on economic feasibility of development projects will be limited. Oil and natural gas developers should deal with emerging risk factors from a shift in demand. Climate change regulations will have limited impact on economic feasibility of development projects for the following reasons: 1) Greenhouse gas emissions from oil and natural gas development are on the rise but the amount of emissions is still far lower than greenhouse gas emissions from end users and 2) under the EU Emissions Trading Scheme, oil and natural gas development projects are listed in sectors at risk of carbon leakage, for which emission allowances are allocated free of charge. If the emission trading scheme is strengthened and a carbon tax is widely introduced in the international arena, as Norway does today, those regulatory measures will be a hit to economic feasibility of oil and natural gas development projects. In addition, climate change regulations will have a varying amount of impact on different fossil fuel sources because each fossil fuel has its own carbon intensity. Accordingly, carbon regulations will be a bigger blow to fossil fuel sources with higher carbon intensity.
For oil, the decline in oil demand due to stronger climate regulations will lead to sales drops and asset devaluation of oil developers, and those companies will eventually confront with significant financial and economic risks. Worse, oil prices under the 450 scenario of OECD/IEA (2014) stay lower than prices set under the new policies scenario, adding to the risk. Oil prices should remain steady for longer term for investment payback in upstream.
For natural gas, demand is forecast to decrease through 2040 under the new policies scenario, and natural gas developers will meet with financial and economic meltdown risks if climate regulations continue to chip away demand in natural gas and result in sales drops and asset devaluation. On the positive side, under the 450 scenario with the strictest regulations, uptick in natural gas demand is forecast through 2040, a sign that natural gas developers will be more resilient than oil developers.
Additional carbon costs due to climate regulations will lead to growth in operational expenditures and production costs in upstream areas, adding to the uncertainty of economic feasibility. The magnitude of impact depends on project types, carbon costs, oil prices and gas prices.
Besides, oil and natural gas developers should deal with a variety of other elements. Physical changes in climate conditions, including sea-level rise, hurricanes, typhoons, tropical cyclones and average temperature changes, are cases in point. In addition, changes in natural resource conditions that will have some impacts on biomass production capacity, fluctuations in the minimum and maximum temperature, snowfall and ice should also be in a sharp focus. These changes will have significant impacts on operational cost growth, production capacity reduction and operational disruptions. Physical changes in climate conditions can also worsen the existing risk factors in oil and natural gas development. Climate change will increase the frequency of droughts and floods, resulting in a growing number of water-stressed communities. Conflicts over resource depletion will grow, while demand for natural resources will remain high in many other areas, putting developers in a difficult position to continue operations without any disruptions. In addition, chances are high that developers�� reputation will be tainted and the number of lawsuits against them will rise. Litigations between partner companies will grow in the case of failures in risk forecasts and management. New problems will emerge if companies fail to reflect changing climate in work conditions under the Health, Safety and Environmental management system for their employees. Changes in the geopolitical risk situation are also one of the effects of climate change.
3. Research Results and Policy Suggestions
Resource developers have to deal with stricter regulations associated with climate change and physical changes in climate conditions. Demand for oil and natural gas will change and carbon costs will grow on the back of regulatory revisions, hurting profitability of upstream areas. The resource development sector will undergo significant changes, taking into account new challenges. Recently, global oil development companies have intensified their efforts for greenhouse gas emission reduction for climate change mitigation. For example, companies have decided to involve carbon costs in their feasibility tests for upstream areas. Chevron is one of energy developers that received positive reviews on their climate change mitigation efforts. Chevron has realized that regulatory revisions and changes in other elements, including climate conditions, consumer behaviors and company reputation, will bring new risks and fresh opportunities because pressure is mounting on climate change mitigation. In the end, it will bring significant impacts on the company��s financial and operational performances such as business operations, profits and costs. Chevron has come up with business strategies to deal with climate change. For example, the company introduced the risk management process, revised a business portfolio and participated in campaigns for climate change.
Korean oil developers should follow the footsteps of global oil producers. Comprehensive evaluation and management of risk factors and opportunities are imperative. Companies need to remain flexible to climate change and stay vigilant against new risk factors and business opportunities even though the speed and magnitude of climate change remain uncertain. In addition, companies have to reflect cost growth related to climate change in their capex calculations. An overhaul in the risk management and application of long-term strategies, including carbon dioxide capture and storage and reduction in natural gas burning, should be promoted together. |
