This is the second part of a three-part series that will examine the new Low Carbon Development Strategy (LCDS), COP26, and Guyana’s role in the global fight against climate change.
OVER the last couple of weeks, leaders meeting at the UN Climate Change Conference (COP26) have highlighted the long-term need to reduce global reliance on fossil fuels and the emissions they produce. Companies across the oil and gas space are similarly transitioning towards an “all of the above” approach—introducing new investments in clean energy and making commitments to reduce their emissions while continuing to produce fossil fuels under certain circumstances. The conflicts between emissions reductions and growing demand for energy have made this a complex challenge for both governments and companies to solve.
Developed countries like the United Kingdom, Germany, and the United States are working to aggressively tackle carbon emissions, but they also continue to rely heavily on energy production as an economic staple and are struggling with the impact of higher prices and global shortages on their economies. The developed world has been heavily criticised, particularly around this year’s COP, for the perceived hypocrisy between its push to dissuade developing countries from developing oil and gas even as they themselves continue to develop and rely on their own.
A recent Foreign Policy article from development economist, Vijaya Ramachandran, highlighted that, “a ban on financing gas projects would practically end support for critical energy infrastructure necessary to support economic development and raise living standards.” The article heavily criticised Norway, a major supplier of natural gas and oil, for lobbying the World Bank to stop all financing of natural gas projects in Africa and elsewhere as soon as 2025. Norway has announced plans to continue producing oil and gas for the foreseeable future, in part to meet the considerable and growing demand for these resources globally.
Despite implementing some of the world’s most aggressive emissions reduction targets, leaders like the United Kingdom’s Prime Minister, Boris Johnson, are grappling with supply issues that have led to soaring electricity prices and shortages across Europe. Similarly, despite aggressive policies to reduce production and emissions at home, U.S. President Joe Biden’s administration has called on Russia and OPEC to “boost oil output to tackle rising gasoline prices.”
Balancing the need to continue production while also reducing emissions is complex, and world leaders and private companies are working to find the sweet spot. By continuing to develop oil and gas in a sustainable way, while also investing in renewable resources like hydro, wind, and solar, the world can both meet demand and reduce carbon emissions. This challenge—to meet demand while also reducing emissions—has created new opportunities for resource-rich countries like Guyana to be able to satisfy this demand.
Vice President Bharrat Jagdeo told U.S. National Public Radio (NPR), in an interview last week, that blocking new development would mainly serve the interest of established producers like Saudi Arabia. “We have a small window to get as much as possible out,” Jagdeo said, highlighting both the opportunity and the time constraints that Guyana faces while trying to balance the fight against climate change with urgent need for funds.
Guyana’s updated LCDS reflects that balance, outlining an approach that allows the country to develop its rich oil and gas reserves and contribute to global supply, while also reducing carbon emissions. The government plans to transition to cleaner and renewable energy sources by using oil revenues to build renewable generation, protect the country against sea level rise, and conserve critical environments like the Amazon that suck carbon out of the atmosphere.
Private companies are also looking to ensure that development is more sustainable and many already have net zero commitments for their operations in place. ExxonMobil, the operator of the Stabroek Block, recently announced plans to invest $15 billion dollars in developing “low carbon solutions,” including carbon capture sequestration (CCS), a technology that injects carbon emissions back into the Earth. It hopes that technology will one day allow for reducing emissions without curbing production. Other major companies like Shell and BP are investing heavily in renewable technologies like offshore wind and solar as part of their portfolios while continuing to develop oil and gas.
As companies turn their focus to environmental and sustainability goals, they are also looking at the types of regions they are developing. Many companies and analysts are now evaluating areas like Guyana not just on traditional measures like cost, but also on measures like the relative carbon intensity of oil. Higher quality reserves of light oil like those mainly found so far in Guyana require less energy to separate and process and burn cleaner, producing fewer emissions compared to heavier oil sources like Canada’s tar sands.
Companies globally are moving quickly to offload more carbon intensive oil assets and transition to ones like Guyana that they think may be able to produce oil profitably even in a lower-emission environment. That demand, if paired with strict environmental policies and measures to protect that vast carbon-absorbing potential of the Amazon, should position Guyana to take advantage of a changing world.
In Part 3, the final installment of this series, Understanding Energy will explore emerging technologies and the future of oil and gas development in a warming world.