Abundant fossil fuels leave clean energy out in the cold

From Cuadrilla’s well in West Sussex to Gazprom’s rig in the Arctic, unconventional sources of gas and oil are putting the transition to renewable energy at risk

Greenpeace action Against Gazprom's Arctic Drilling
A Russian Coast guard officer is seen pointing a gun at a Greenpeace activist as five activists attempt to climb the ‘Prirazlomnaya,’ an oil platform operated by Russian state-owned energy giant Gazprom.

In most respects Gazprom’s Prirazlomnaya oil platform has little in common with the small drilling rig which stood, for a while, near the English village of Balcombe.

The giant Russian structure, pieced together from parts of a disused North Sea oil operation, stands miles offshore in the ice infested waters of the frozen arctic. Cuadrilla’s attempt sat amidst a Christmas tree plantation near a brook and a small country lane. But both were instantly seen as something new.

The past decade has seen a transformation in clean energy – the price of solar panels has fallen by 80% and wind turbines have become six times more powerful, but drilling has also changed just as completely.

Excited by anything that looks like growth policymakers are left promoting two entirely different solutions to the world’s energy needs, which happen to sit very poorly together.

From the tar sands of Canada to deep-water drilling new technologies and historically high oil and gas prices across most of the world have emboldened the oil and gas industry to enter regions previously given up on, or never exploited.

Cuadrilla’s Balcombe well deployed new technologies to a site drilled unsuccessfully just two decades ago by oil giant Chevron. Gazprom, for its part, boasts (to the disbelief of many) that it’s rig is "an offshore ice-resistant stationary platform - the first of this kind designed and constructed in Russia."

Because the oil and gas is harder to reach, the new methods are often more intensive. In Balcombe it may bring trucks and hundreds of wells. In the Arctic giant rigs and ice breaker tankers - in both places a fears - however remote - of accidents and spills.

Cleaning an oil spill from below the ice may simply not be possible. Fracking poses smaller risks, but still uses large volumes of water mixed with chemicals and dissolved minerals which could pose a threat to local environments if there is a spill.

Though the new drilling methods are often characterised by these local risks, these alone are unlikely to serve as a reason not to pursue them. Instead it is the nature of the abundance itself which poses the greatest problem.

In its last report the Paris based International Energy Agency (IEA) claimed that to have a decent chance of avoiding catastrophic climate change only half of our existing proven reserves of oil and gas can be burnt by 2050 - even assuming dramatic cuts in global coal use and the deployment of carbon capture technologies.

In London the UK’s chief scientist warned ministers that fracking – or any new fossil fuel extraction “would work against global efforts on climate change,” without a new global deal.

Yet it is higher demand, and so stable or rising prices, which the drillers are often counting on. Drilling deeper, further and with more water is rarely going to cost less – though it can reduce the price later.

Shale gas in the US is often seen as the exception. Widespread development – fuelled by cheap capital, favorable laws and significant existing oil and gas infrastructure – has seen the price of gas there fall dramatically from highs in 2005 and 2008 to levels far below those seen in Europe and Asia.

But it was the high price which helped spurred the boom to begin with since then some oil giants have complained they were “losing their shirt” on pricier investments and some reserves have been written off.

Outside the US the cost of drilling deeper or fracking further may also fall - but only as the reserves are exploited.

In China and the UK the cost of fracking is initially estimated to be three to four times that in the US. Drilling in the Arctic reportedly requires an oil price between $100 and $300 a barrel. Fossil fuel extraction, like clean energy, needs production to move down the cost curve. It will take a long time before European shale can outcompete that other growth story, brown coal.

But it’s an odd place to invest, at least if you live in a world likely to act on climate change.

The IEA also forecasts that if the world acts to cut fossil fuel use, fossil fuel prices (including the gas price) will stabilise or fall by 2030. US investors recently wrote to major energy companies asking what they would do in the event that around $6 trillion of high capital investments in new fossil fuel reserves turned out to have no buyers.

The thing is, energy companies remain pretty confident there will be buyers. It is, instead, investments in clean energy which have fallen for two years in a row.

After all, it doesn’t take an energy baron like T. Boone Pickens to work out the world economy just doesn’t need abundant fossil fuels and new wind turbines.

Damian Kahya is the editor of Greenpeace's Energydesk