Art Schroeder, CEO, Safe Marine Transfer, LLC
Oil and gas (O&G) have been good for America and the world. Petroleum engineers, stand up, be counted, and do a shout-out! I believe growing all forms of energy is important for raising global standards of living and that there is also a role for reducing CO2 emissions, from all sources. (Per the United Nations,1 food systems account for over one-third of global greenhouse gas emissions.)
O&G reduce poverty. The required scale and timing to mature alternates (including energy storage) is substantial, as are the benefits of continuing to deliver O&G. Developing energy efficiencies should also be part of the equation. Meanwhile, O&G should not be thrown under the bus (be it diesel or electric!). At this year’s SPE annual meeting, virtually every session had some sort of carbon neutral/net-zero message. At one session, there was a serious discussion about dropping our middle name, Petroleum. If we don’t champion and deliver the goods, who will??
Human progress measured in global GDP since the industrialization of oil (say Colonel Drake in 1859), according to Our World Data,2 has risen from $1.9 trillion to $113 trillion (2018), a nearly 60-fold increase. A good part of that rise, up to the 1970s, was the Western world. About this time, much of the rest of the world GDP started to rapidly rise.
During the last 50 years, Pakistan’s GDP has increased 12x, China up 15x, Saudi Arabia is up 22x, and the U.S. is up 4x, (from a much higher base). Arguably, a good part of growth this period was fueled by O&G, with coal growth exploding, particularly in China, up 120x.3,4 Another measure of human improvement during this period is the dramatic reduction in extreme poverty, referenced by the World Bank at $2.15/day. On a global basis, extreme poverty impacted nearly 70% of global population in 1860, 40% in 1970, and under 9% in 2017.
A major worry with extreme poverty is that some of the world’s poorest countries are also experiencing some of the highest growth rates (Africa at 2.49% pa versus U.S. at 0.6% pa). Sub-Saharan Africa’s extreme poverty level was at 37% in 2017. Even before the global Covid pandemic, researchers expected that half-a-billion people would remain in extreme poverty by 2030.5 The global recession that is following the pandemic exacerbates this further.6 If the stagnation of the very poorest economies persists, we will see a growing divide of global income distribution. A key to further reduction in poverty and a continued rise in GDP will be widely accessible, affordable and reliable energy. A big question is, will fossil energy, which has fueled these fantastic improvements, be allowed to be part of the mix? Who will pay? And how much?
Governmental attitudes. On an international level, at the COP26 climate summit, the United States, Canada and 18 other countries committed to stop public financing for fossil fuel projects abroad by the end of next year and steer their spending into clean energy instead. This year’s COP26 climate summit published a draft United Nations proposal to tackle the issue of "loss and damage," with the launch of a new fund to help countries cope with the cost of climate damage. This may prove to be one of the largest-ever transfers of wealth, trillions pa, per U.S. Climate czar John Kerry.
Domestically, the Biden administration ran on a pledge to reduce oil and gas and increase renewables. Making good on his pledge, one of Biden’s first actions was to revoke approval for the Keystone XL pipeline and impose a moratorium on oil and gas leasing on federal lands and waters. Most recently, the Inflation Reduction Act7 further boosts climate initiatives. Not wanting to be seen as a laggard, in August of this year, California regulators passed rules banning the sale of new gas-powered cars by 2035. The California Air Resources Board (CARB) unanimously outlawed the sale of new natural gas heaters by 2030. Included is a directive that state agencies draft a rule prohibiting all gas-powered appliances, which will be voted on in 2025.
Large private funds are also weighing in, as Blackrock Chairman and CEO Larry Fink’s 2022 letter to CEOs stated, “… [in the last two years], we have seen a tectonic shift of capital. Sustainable investments have now reached $4 trillion. Actions and ambitions towards decarbonization have also increased. This is just the beginning—the tectonic shift towards sustainable investing is still accelerating…and transparency around your company’s planning for a net zero world is an important element of that.” Some, notably Berkshire Hathaway’s Warren Buffett (an investor in our company), have, in some sense, been doubling down on oil and gas with recent purchases.
So, with respect to Climate Chaos, it is very well known that our climate has changed over time and virtually all understand that it will continue to change. The current focus is how much of that change is contributed by man, and what to do about it. Across the world, politicians are now promising climate policies costing tens of trillions of dollars. And climate campaigners tell us, if we don’t spend everything on climate now, nothing else matters, because climate change threatens our very civilization. As President Biden says: climate change is "an existential threat." In perspective, just how big is the damage caused by fossil energy?
Claims are made that "countless lives" are being lost to climate-related disasters worldwide. Yet, the International Disaster Database shows that in the 2010s, 18,357 people died each year from climate-related impacts, such as floods, droughts, storms, wildfire, and extreme temperatures. That is the lowest death count in the past century, a 96% decline since the 1920s, despite a larger global population now. And 2020 had an even lower death count at 8,086.8
The wood angle. Indoor air pollution, caused by burning solid fuel sources—such as firewood, crop waste, and dung—for cooking and heating is a leading risk factor for pre-mature deaths and attributed to 4.1% of total global deaths. The WHO calls indoor air pollution “the world’s largest single environmental health risk.” Death rates from air pollution are highest in low-income countries. There’s a greater than 1,000-fold difference between low- and high-income countries. The cost- and time-saving to deliver petroleum products to those in need versus development of an electrical infrastructure is substantial.
Many say that Europe is “leading” America in the rush to carbon neutrality. An interesting report9 of how Europe’s “net-zero” carbon emissions are being accomplished is the clear-cutting of forests to produce wood pellets for power generation, now classified as somehow being “green” and “renewable” under the EU climate regulatory regime. It gets better—it isn’t enough that Europe is clear-cutting its own ancient forests—it turns out that forests are also being clear-cut in the U.S. to feed Europe’s hunger to grow this medieval power source. A new report from Climate Central shows that 4.4 million tons of wood pellets were cut from American forests last year, and 98% of them were shipped to Europe to be burned for energy, Fig. 1.
Forbes reports10 that Germany recently approved the demolition of a wind farm and small village to facilitate the expansion of a strip-mining operation for highly polluting lignite. The lignite will be used to supply formerly mothballed coal power plants being reactivated to help keep homes heated and lights on, as winter sets in across the European continent. Contrasting this with European delegates, who were asking for a construction delay on an oil pipeline between Uganda and Tanzania, Ugandan President Yoweri Museveni wrote, “When decisions like these are being made, and without a shred of self-awareness or honor, it is no surprise some of my counterparts call for reparations or handouts. Dialing down the brazen double-standards is what we desire, along with the lifting of the moratorium on fossil fuel investments for Africa, herself, so we can meet the needs of our own people.”
Moving forward. One of the biggest tasks facing humanity today is lifting the world’s most impoverished people while continuing to improve the rest. As petroleum professionals, we can help by doing what we do best, find, develop and deliver oil and gas safely, reliably, and at an affordable price. Additionally, many O&G companies are leveraging their skill sets and infrastructure to both increase O&G and reduce carbon.11 My company is doing its part on both fronts by helping extend the reach, and lower the cost, of subsea tie-backs. These new, longer tie-backs will produce more oil, at a lower cost, by increasing the productive life of critical hubs and pipeline infrastructure and without the capex, opex, and CO2 emissions from powering a pump. WO
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ART SCHROEDER co-founded Safe Marine Transfer, LLC (SMT) in 2013, where he serves as CEO. Prior to SMT, he founded Energy Valley, Inc., in 2001, focusing the company on assisting entrepreneurial start-ups while also consulting with DeepStar and large oil and service/manufacturing companies, defining technical needs and then leveraging for commercial advantage. Prior to Energy Valley, Mr. Schroeder spent 25 years in upstream operations, engineering, construction, strategy development, and crisis management with Amoco and BP. He also has served on numerous professional, corporate, and civic boards and has published over 100 technical papers and has been granted patents on his innovations. Mr. Schroeder graduated from Georgia Tech with BS and MS degrees in chemical engineering with a minor in environmental engineering, as well as earning an MBA from the University of Houston.