The International Energy Agency (IEA) last week released its report, titled Net Zero by 2050—A Roadmap for the Global Energy Sector.
It is a forward-looking report on how the organisation sees the world getting to its stated goal of net zero-emission by the middle of the century, as has been committed to by most countries, including T&T, in the Paris Accord.
While the IEA acknowledged that there were many pathways to net zero, and so far countries have engaged in more rhetoric than action, it charts a way forward that its authors feel is the best course for the world to move to a sustainable energy future.
Perhaps the most important finding in terms of the medium- to long-term impact on the T&T economy, is the suggestion that there ought not to be any commitments from countries and companies to new oil and gas—yes gas as well—projects, other than those already sanctioned in 2021.
The report read: “Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coal mines or mine extensions are required. The unwavering policy focus on climate change in the net-zero pathway results in a sharp decline in fossil fuel demand, meaning that the focus for oil and gas producers switches entirely to output—and emissions reductions—from the operation of existing assets.
Unabated coal demand declines by 90% to just 1.0% of total energy use in 2050. Gas demand declines by 55% to 1,750 billion cubic metres and oil declines by 75% to 24 million barrels per day (mb/d), from around 90 mb/d in 2020.”
If this scenario is not frightening to the T&T Government and ordinary citizens, then we are living in blissful ignorance.
As a country, we need to insist that our Government develops and executes an alternative development agenda that takes into account the reality that the writing is on the wall for fossil fuels and that we have to build an economy that is sustainable and can be prosperous, even if we do not get a cent from oil and gas.
These are challenging things to consider and much more difficult than the usual plethora of personal attacks when views are at variance with certain narratives. It actually requires hard work and leadership.
Already, natural gas prices are significantly lower than when T&T entered the LNG business a mere 22 years ago. The simple reason for this is supply and demand.
While there has been growing demand for natural gas, the pace at which gas has been discovered and brought to market globally has lowered the average prices significantly.
Think of how T&T was during the early 2000s when global LNG prices were high. We had massive construction happening, the waterfront projects and Government Campus Plaza were being built, One Woodbrook Place, interchanges, NAPA/SAPA being built, GATE fully funded, promises of new hospitals to be built, forex was not an issue; in fact, there was significant growth in official reserves and money being placed in the Heritage and Stabilisation Fund.
The economy was over-heating and when we look back and compare it to today, T&T was like the land of milk and honey.
A lot of that wealth was generated by money from the energy sector, particularly LNG export and strong crude prices. The growth of LNG out of Australia, Shale gas in the US, huge gas discoveries in Africa and even the growth of energy demand in China and India cannot accommodate the increase in production.
Consider what will happen to prices when demand falls significantly and what you must see is the high-cost producers will be run out of the market first and those that stay will have to contend with much smaller margins and returns. T&T is not a low-cost producer of natural gas.
The report suggests that in the net-zero pathway, global energy demand in 2050 is around 8.0% smaller than today, but it serves an economy more than twice as big and a population with two billion more people.
The IEA report posited that there will be more efficient use of energy, resource efficiency and behavioural changes combined to offset increases in demand for energy services as the world economy grows and access to energy is extended to all.
Instead of fossil fuels, the report noted, the energy sector is based largely on renewable energy. Two thirds of the total energy supply in 2050 is from wind, solar, bioenergy, geothermal and hydro energy.
Solar becomes the largest source, accounting for one fifth of energy supplies. Solar PV capacity increases 20 fold between now and 2050, and wind power 11 fold.
The IEA noted that net-zero means a huge decline in the use of fossil fuels. They fall from almost four fifths of the total energy supply today to slightly over one fifth by 2050.
Fossil fuels that remain in 2050 are used in goods where the carbon is embodied in the product, such as plastics.
Electricity accounts for almost 50% of total energy consumption in 2050. It plays a key role across all sectors—from transport and buildings to industry—and is essential to produce low-emission fuels such as hydrogen. To achieve this, total electricity generation increases over two and a half times between today and 2050.
These are not just academic findings but scenarios and decisions that are being played out today.
Already, BP PLC, the parent company of bpTT, has said that it intends to sell off some of its fossil fuel assets and to invest in becoming an integrated energy company led by renewables.
While there has been no statement on its T&T asset, it is not inconceivable that the company could exit this country and the dislocation it will cause will not be too pretty.
For years, bpTT has had limited exploration going, just enough to maintain its production. With the massive cuts in BP PLC’s international exploration budget, it is difficult to imagine how this will not negatively impact the company here, including its production of hydrocarbons.
Will BP, for example, be interested in investing in smaller fields, as we have in T&T, when its position is only high-value fossil fuel targets and mainly renewables?
When we spend time as a country arguing about what event led to the spike of the COVID-19 virus, it is a good distraction from being forced to think and articulate a strategy to emerge from the lockdowns.
It is a smoke-screen, an attempt almost to keep the society stoned so we hide the fact that a year later, we are almost imprisoned in a country whose official borders remain closed while its unofficial borders are available for whoever can get here on the first pirogue.
The world’s largest oil and gas company, Exxon Mobil, is having a major board fight as funds that invest in the company are demanding changes at the board level to reflect a new focus on climate change and transition to renewables.
California has just agreed with the US government to have major wind farms offshore. As the CEO of BP said, we cannot fight gravity.
Therefore, holding on with our fingernails to oil and gas prices will get us nowhere. We need to simply get on with it. Get on with the work of economic transformation, get on with the work of fighting the pandemic, get on with the work of finding vaccines.
Because at the end of the day, no one will care who built the hospitals if quality healthcare is not available.
No one will care if it means the students who are set to write SEA live in a country that never heeded the warning signs and found itself ill-prepared when change comes knocking.
Curtis Williams is conflicted why who built a hospital is so important in a time of national crisis with hundreds dead and an economy breached?