What Climate Change Means for Oil and Gas Companies

Climate change is a reality that every nation needs to understand while adapting to local conditions, Hector Rocha, Deputy Leader Energy LATAM North at EY, told the Mexico Oil & Gas Summit 2018 at the Sheraton María Isabel hotel in Mexico City on Thursday. “Energy demand will grow around 30 percent in the coming 20 years and countries and companies will need to find a reliable and sustainable way to supply this demand.”

Rocha said that 2 billion people will come out of poverty in the next 20 years and “these people will have access to better life conditions, which translates into more energy consumption.” As a result, it is imperative to ensure all this consumed energy is efficient and clean. “Why? Because failing to do so will provoke a harsh change in climate phenomena across the world.”

To give the expected growth in consumption some perspective, Rocha likened it to China and India. “In the next 20 years, this 30 percent growth in energy consumption will be the same as adding the consumption of the population of China and India in today’s context.” In parallel, the world boom in oil and gas exploration and production suggests that fossil fuels will also be here for more years to come. “Today, the world consumes 31 percent oil, 21 percent natural gas and 28 percent coal, while the remaining percentage belongs to other sources, particularly renewables,” he said.

While Rocha believes the world has enough hydrocarbons resources to supply energy demand, he questioned what that means for everyone’s future. The answer, he said, might seem easy but actually it is not. “Today, the world produces between 80 to 100 million tons of CO2 per day. Since 1950, CO2 production has increased dramatically. We have had higher temperatures all over the world since 2001, when the world started to experience the hottest years ever.” In 2003, he continued, Europe experienced a heat wave that killed over 10,000 people. “We need to understand what is really happening.”

So then, what should oil and gas companies do to counteract climate change? “According to similar international studies, we are 14 years closer to reaching a 2oC increase in the world’s temperature. This means that natural disasters will multiply and the climate scenario will be worse than it is today. This is why major oil and gas companies are already diversifying their business portfolios to incorporate environmentally-friendly ways to produce natural gas, or even develop cleaner ways to produce energy, like acquiring smaller renewables companies,” Rocha said.

The best way to power the world in the future, Rocha added, is “by having inclusive and strong public policies that incentivize the use of cleaner sources of energy and adding more value to current E&P activities by developing better technology that allows operators to be, not only more effective, but also sustainable and environmentally friendly.” In the end, Rocha reminded the audience, “climate change is not a matter of killing your oil and gas business, it is a matter of understanding the reality, being able to diversify portfolios and adjusting mindsets to tackle energy demand in cleaner and sustainable ways.”