Wood Mackenzie publishes new assessment of 50 regions that supply more than 90 per cent of the world's oil and gas which reveals how just half have access to the CCS and clean energy capacity needed to power net zero transition
Around half of the world's largest oil and gas production hubs have the right attributes that should allow them to play a constructive role in the net zero transition, significant new research from Wood Mackenzie has found.
The influential analyst firm published a major new report late last month that assessed 50 of the world's largest upstream oil and gas production regions based on their ability access to low-cost renewables and their potential to host industrial-scale carbon capture and storage (CCS) facilities. As such it sought to highlight the "future energy super basins" that are best placed to deploy the technologies that would allow oil and gas firms to deliver on their long term net zero emission goals.
The North Sea was highlighted in the report as an oil and gas producing region that has the combination of CCS capacity and renewables potential that would allow it to become a "future energy super basin", alongside the Gulf Coast and Permian basin in the US, the Rub al Khali in the Middle East, and Australia's North Carnarvon.
Andrew Latham, vice president at Wood Mackenzie and one of the authors of the report, predicted that the oil and gas industry was set to become more focused on basins with high renewable energy and CCS potential as the net zero transition gathered momentum and demand for fossil fuels is curbed by the roll out of clean technologies.
"Of the remaining resources from traditional super basins, only 1,453 billion boe - or half - have been identified as future-fit energy super basins defined as having abundant resources, access to low-cost renewables and hub-scale CCS opportunities," he said. "The upstream industry of the 2030s will have a different footprint as investment migrates to the new energy super basins. With some basins set to be left behind, the industry will become even more concentrated in its top basins. At the same time, upstream strategies will increasingly merge with low-carbon businesses."
Wood Mackenzie noted the results of its oil and gas basin scorecard - which assessed the regions which supply more than 90 per cent of the world's oil and gas - could change over time, given basins' rankings could be improved if governments introduced regulations that accelerated decarbonisation of upstream fossil fuel production.
"These scores are not set in stone," Latham said. "Plenty of basins currently sit somewhere in between energy super basins and disadvantaged basins. Host governments may have opportunities to improve the outlook of a basin. Carbon taxes and other fiscal and regulatory moves to accelerate decarbonisation - especially where they enable CCS - could play an important role and should be seized where possible."
However, the report also issues a stark warning to basins that are failing to prepare for the clean energy transition. It stressed that the upstream oil and gas industry would need to focus its activity on regions where clean energy projects could be easily deployed and integrated with existing business operations.
"The co-location of low-cost renewables with low-cost oil and gas is key," Latham said. "Surplus renewables can also be fed into the grid as part of the overall energy system."
Emerging CCS technologies are set to be a critical plank of oil and gas producers' business operations over the coming decades, the report notes, arguing that operators' future viability depends on access to operators who can offer sequestration-as-a-service to emitters.
"We expect global CCS capacity to grow to between 2 Btpa and 6 Btpa by 2050," Latham said. "Exactly how and where this will happen is unclear. Our assumption here is that this growth will come mainly from countries that will have hub-scale emissions sources available close to subsurface storage options."
Upstream oil and gas producers that focus their efforts on delivering "future energy basins" that combine oil and gas production with clean energy technologies will be at a distinct long-term advantage, Latham predicted. "It will take many years, even decades, to fundamentally realign global upstream portfolios with the new energy super basins," he said. "First-mover advantage applies. The sooner the transition starts, the better."
The report came just days ahead of the UK government announcing that a raft of 20 CCS and hydrogen projects had made the shortlist for public funding through its industrial decarbonisation programme.
Ruth Herbert, chief executive at the Carbon Capture and Storage Association, said that the "world-leading projects" would help attract considerable inward investment to the UK.
"CCUS is critical in achieving net zero and positioning the UK as the world's first at-scale hydrogen economy," she said. "It will transform our industrial regions - driving jobs and growth through inward investment and export opportunities."
This article is part of the Net Zero Commodities Hub, hosted in partnership with Wood Mackenzie.
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