FUTURE OF HYDROCARBONS

FUTURE OF HYDROCARBONS | La Jolla Conference 30 th Anniversary Policy Brief

In sum, there are three main issues: governance around the risks of oil declining; oil and gas companies developing and seeking more granular strategies going forward; and, as climate change policies become mandatory, the pressures derived from an accelerated and faster transition. Indeed, perhaps more sorely needed than any further scenarios are actions, from government and companies alike. Natural Gas For natural gas, we need to discuss the scale of flaring. The largest amount of flaring is occurring in Russia, Iraq, Venezuela, the US, and in Mexico. A vast amount of the flaring is being done by NOCs. How does the world influence these countries and OPEC to reduce flaring? The issue of methane and emissions is also crucial. Major strides by industry and government had slowed but are clearly back in focus. These issues and climate concerns more broadly will also translate to LNG, where carbon neutral cargoes have recently been sold from the US to both Asia and Europe.

Across Latin America, natural gas has been a key to energy security and early emission reduction gains in the power sector. But it is also unmistakably a source of domestic revenue and regional tensions too. The Argentina-Chile natural gas interconnection is a world-class example. But in today’s context, the drive to develop natural gas or support its deployment demands debate: Is it a transition fuel, or is it a transition inhibitor? Take Argentina’s highly touted and government-embraced Vaca Muerta unconventional gas play. In the context of managing emissions, it is clear that the immense play cannot reach its potential without investment in CCUS. But where will this money come from? Industry? YPF or the provinces, in effect the government? Given pressure on capital, one can argue that it is much easier to raise money for large renewable energy export projects. Certainly, the subheading of natural gas in a discussion of the future of hydrocarbons leads to more questions than answers. Conclusion The axiom ascribed to Saudi Oil Minister Sheikh Yamani as to the end of the stone age and its parallels with oil is well- worn, but in this context does underscore the point of the discussion and brief: the future of hydrocarbons is shaped by environmental concerns. There is almost universal consensus as to the evolving transition. But far from agreed upon are the pace and

FUTURE OF HYDROCARBONS | INSTITUTE OF THE AMERICAS