Environmental Audit CommitteeWritten evidence submitted by Greenpeace

Summary

In their Response to the Committee’s report and recommendations, the Government cites its commitment to a transition to a low carbon economy, as a justification for not supporting the Committee’s call for a moratorium on oil exploration in the Arctic.

In addition the Government cites IEA figures from the 2011 World Energy Outlookⁱ for its “450 Scenario” for increased oil demand in 2035, as justification for on-going oil and gas exploration in the Arctic.

This response failed to take into account the changes reflected in the World Energy Outlook 2012—which looks at both global oil supply and demand in 2035 under the “450 Scenario”—which in any case gives only a 50% chance of staying below a 2 degree increase in global average temperature.

These two arguments in the Governments response—that globally we’ll run out of production relative to demand, and that the need for domestic fuel/energy security requires Arctic production—are not supported by the IEA’s 2012 World Energy Outlook.

In the 2012 WEO, the IEA says “In view of the technical and environmental challenges and high cost of operating in extreme weather conditions, including the problems of dealing with ice floes and shipping in water that remains frozen for much of the year, we do not expect the Arctic offshore to make a large contribution to global oil supply during the Outlook period.”

Further, data in the 2012 WEO suggests that oil consumption in the 450 scenario could be met entirely by currently producing and already discovered fields.

Global oil demand that would justify on purely economic terms exploitation of Arctic oil reserves would have a catastrophic impact on the climate, leading to global average temperature increases of over 6 degrees C.

Introduction

1. The 2012 WEO fundamentally undermines the claim of the Government that Arctic oil exploration and production will be required to meet both global and UK oil demand over the period to 2035.

2. Global oil demand under the 450 Scenario is 79 million barrels/day in 2035.ⁱⁱ

3. Production figures in the WEO 2012 indicate that world oil supply—a combination of existing production—plus fields yet to be developed, but already discovered—will meet that demand.ⁱⁱⁱ

4. This does not include Arctic fields yet to be discovered. In WEO 2012, the Arctic is explicitly described as “undiscovered but technically recoverable”, based on the US Geological survey estimates, the widely used justification for exploration of the Arctic for oil and gas.^iv

5. Further, the IEA WEO 2012 expresses scepticism that Arctic production will make a significant contribution to global supplies by the 2035: “In view of the technical and environmental challenges and high cost of operating in extreme weather conditions, including the problems of dealing with ice floes and shipping in water that remains frozen for much of the year, we do not expect the Arctic offshore to make a large contribution to global oil supply during the Outlook period [2035].”^v

6. The only circumstances under which Arctic resources would be required to meet global oil would lead to far greater temperature increases than those of the 450 scenario.

7. Widely disseminated, authoritative projections for oil production in addition to those in the WEO suggest rather greater increases in productive capacity—meaning that the Arctic is increasingly unlikely to play any role in a transition from current fossil fuel consumption to anything resembling a low carbon future.

8. According to The Belfer Institute at Harvard University, output should grow from the current 93 million barrels per day to 110 million barrels per day by 2020, the biggest jump in any decade since the 1980s. What’s more, this increase represents less than 40% of the new oil production under development globally: more than 60% of the new production will likely reach the market after 2020.^vi

9. The implications for the climate of a global oil market that where demand could possibly justify that level of production are stark: in the WEO 2011, the trajectory for oil demand versus projected temperature increase is clear:

Scenario	Oil Use	Predicted Average Global Warming
2010 Global Oil Demand	86.7 million b/d	0.8 degrees C (actual)
2020—IEA Current Policies	94.6 million b/d	6 degrees C
2020—IEA 450	88.1 million b/d	2 degrees C
2020—Maugeri forecast oil production capacity	110.6 million b/d	>8 degrees C?

10. There is a worrying contradiction between stated UK Government ambition to meet a 2 degree climate target,^vii and willingness to support oil company ambition to exploit the Arctic resources as expressed in the Government response^viii to the EAC’s recommendations.

11. There is an emerging view from a variety of sources both within the oil industry ^ix—such as the French oil company Total—and the financial industry which supports oil industry activity—including Credit Agricole^x—that oil exploration in the Arctic is not supportable.

12. Reductions in demand for oil, whether in support of a policy to limit the impacts of climate change, or to reduce dependence on expensive, volatilely priced imports or simply to improve energy security—all publicly stated Government ambitions—would lead to a reduction in oil prices and a subsequent loss of market capitalisation for oil and gas companies, such as BP, Total, Royal Dutch Shell and Statoil, with high priced projects, such as those proposed for the Arctic most at risk.^xi

13. Such impacts on the global oil and gas industry will lead to conflicts, and a lack of coherence in the overlapping spheres of a sustainable climate policy, domestic energy and transport policies (based on chasing fuel supplies rather than a sustainable energy system) and a political economy with seemingly unbreakable links to the vested interests of the fossil fuel supply industry.

References

ⁱ http://www.worldenergyoutlook.org/publications/weo-2011/

ⁱⁱ http://www.iea.org/Textbase/nppdf/stud/12/weo2012.pdf, p 83, table 3.1

ⁱⁱⁱ http://www.iea.org/Textbase/nppdf/stud/12/weo2012.pdf - p. 86 table 3.4

^iv http://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdf

^v http://www.iea.org/Textbase/nppdf/stud/12/weo2012.pdf. Box 3.4, page 110.

^vi http://belfercenter.ksg.harvard.edu/publication/22144/oil.html?breadcrumb=%2Findex ;
Maugeri, Leonard. Oil: the Next Revolution. The unprecedented upsurge of oil production capacity and what it means for the world. Discussion Paper 2012–10, June 2012

^vii https://www.gov.uk/government/policies/taking-international-action-to-mitigate-climate-change

^viii Protecting the Arctic: Government Response to the Committee's Second Report of Session 2012–13
http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenvaud/858/858.pdf

^ix http://www.ft.com/cms/s/0/350be724-070a-11e2-92ef-00144feabdc0.html#axzz2Icw9zaLK

^x http://www.ca-cib.com/group-overview/csr-sector-policies.htm

^xi http://www.businessgreen.com/bg/news/2239778/hsbc-oil-majors-at-risk-from-unburnable-reserves

1 February 2013