What do the former Redcar steelworks on Teesside, a university in the Midlands and forests in the Scottish Highlands have in common? Answer: Big Oil is praying they hold the key to its future. The oil majors have staked huge sums on the dash for gas, hoping lower carbon emissions from burning natural gas instead of coal would make it the fuel for a lower-carbon future. Their argument was that using abundant reserves of gas – which emits about half the carbon dioxide of coal – would allow for a gradual shift to renewables. However, this transition is nowhere near fast enough for the Extinction Rebellion movement – or politicians of various shades. Earlier this year, then chancellor Philip Hammond demanded that no new home be built with a gas boiler from 2025. Labour’s party conference called for the UK to achieve net zero carbon emissions by 2030 – bringing forward the Conservatives’ target by two decades. Suddenly, those huge gas bets are starting to look precarious. Earlier this month, Bob Dudley, the outgoing boss of BP, gave a stark warning: “Gas is being increasingly marginalised – even vilified and demonised,” he said. “Gas has a vital role to play in the energy transition . . . To exclude gas – when so much is at stake – is to take a huge and unnecessary risk.” But cleaning up gas is their most pressing concern – and arguably one of the most problematic. Carbon capture and storage is nothing new as a concept. It involves trapping carbon dioxide at the point of combustion in sites such as steelworks and power stations, then piping it deep underground. Depleted gas and salt caverns in the North Sea are seen as ideal. Making the process commercially viable is another matter. While there are successful international CCS projects, there have been numerous abortive schemes in the UK. The government’s spending watchdog found in 2017 that ministers had spent £168m on two failed CCS trials over the past two decades. CCS is laden with risk. A sceptical public need to be convinced that the carbon dioxide will remain trapped underground. Critics worry that storing gas at high pressure could fracture rock layers, creating huge potential liabilities. Hydrogen’s sudden rise to prominence is no coincidence either. Oil companies want to inject it into the gas network, mixing it with natural gas in concentrations of up to 20% as a fuel for boilers and cookers. In a project sponsored by gas pipeline giant Cadent, Keele University in the Midlands is using hydrogen and natural gas to heat the campus. The allure is easy to understand. Hydrogen is the ultimate clean fuel: the only residue from burning it is water. It is produced either by cooking natural gas in steam, or by electrolysis. Getting hydrogen that is produced from natural gas into millions of homes could provide oil companies with a stable model for decades to come. But, again, the challenges are myriad. Hydrogen can make metal brittle, which could force the wholesale replacement of gas pipes. Using it might require different domestic boilers – plus producing it is very expensive, and not without its own carbon emissions. The cost of paying for carbon capture and hydrogen could land, at least partially, in taxpayers’ laps. Ministers are consulting on a law change that would see households pay upfront for CCS projects, before they have been built. Bank of England governor Mark Carney sent shock waves through the City four years ago by warning that investors in fossil fuel companies faced “potentially huge” losses from vast reserves that could become “literally unburnable”. That warning was prescient. The fossil fuel risk has created a huge dilemma for investors. Some, such as Norway’s $1.1 trillion (£854bn) sovereign wealth fund – itself a product of the country’s huge hydrocarbon reserves – are selling their stakes in oil and gas explorers to protect against falls in the oil price. As of about a year ago, almost 1,000 institutions with $6.2 trillion in assets had committed to dump fossil fuels, according to the consultancy Arabella Advisors. Waltham Forest council’s £842m pension fund became the first local authority scheme to ditch fossil fuels in 2016. The London Pension Fund Authority has banned new investments in oil and gas, and New York’s pension fund – a $210bn giant – is considering divesting itself of fossil fuels. Others argue that simply selling out of companies involved in fossil fuels is irresponsible as it deprives investors of the opportunity to influence boardrooms.
Times 20th Oct 2019 read more »