Securing funding for oil and gas exploration in a zero carbon world - the RPS carbon intensity approach

RPS’ Jason Canning discusses the dual impact of low oil price and the transition to zero carbon, on future hydrocarbon exploration and production.

07 Aug 2020

The current outlook for oil and gas exploration and production might look bleak. Oil companies have reacted to reduced demand and the oil price collapse by slashing their exploration budgets. Exploration activity, already at an all-time low, is reducing further; but this is more than the usual belt tightening in response to an oil price fall. We are seeing a strategic shift, particularly amongst the majors, to a new lower carbon world which impacts both exploration and potential development projects.

The industry will need to make tough choices.  When deciding where to explore, future explorers will have to take into account not only the geological merits of the prospect, but also the carbon intensity of a development project that would follow an exploration success. This is something new, that requires new skills and new ways of evaluating opportunities.

This is a new challenge to our industry. When evaluating exploration or development opportunities both society and investors will demand that companies can quantify the emissions associated with exploring, developing and producing hydrocarbons.

New metrics such as carbon intensity, along with more traditional Environmental Social and Governance (ESG) considerations, will be used to rank projects alongside, or probably ahead of, simple economic ranking.

RPS works with the industry to make decisions based on carbon intensity. Our teams of geoscientists, engineers, environmental scientists and economists are already able to quantify the emissions associated with hydrocarbon development and production. Increasingly, we are being asked to use our skills to evaluate the carbon intensity of undiscovered resources.

Even as the pace towards net-zero carbon quickens, there is still a requirement for further hydrocarbon exploration and production, particularly for the lowest carbon intensity resources such as gas.  RPS works with explorers, investors and governments to help them understand the impact of exploration.  We support clients to make difficult decisions. For those assets that are the most carbon intensive, the decision may well be to leave the hydrocarbon in the ground.

RPS’ Jason Canning discusses the dual impact of low oil price and the transition to zero carbon, on future hydrocarbon exploration and production.

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