Big Oil Is in Big Trouble
By Andy Rowell
Something significant happened on Friday that warrants more than just a few column inches in a newspaper.
With the most divisive presidential election in U.S. history just days away from concluding, it is easy to understand why more is not being made of the news, but just to tell you something seismic happened on Friday last week.
The world's largest listed oil company, Exxon, announced that it was going to have to cut its reported proved reserves by just under a fifth—by 19 percent.
It would be the biggest reserve revision in the history of the oil industry. It is yet another sign that Big Oil is in big trouble.
For years people have been warning that Big Oil's business model was fundamentally flawed and was not only putting the climate at risk, but millions of dollars of shareholders' money.
For years the industry's critics warned the industry was ignoring the risks of climate change and was just caring on drilling regardless.
But the oilmen did what the oilmen do: find oil and gas, no matter the consequences.
And the worst oil company has been Exxon which for decades has denied climate change and the impact that climate change will have on its business.
For decades it could have invested wisely in renewables but it carried on looking for oil and gas—including unconventional oil which is even more carbon intensive than conventional oil. Its critics warned this was pure folly: but the oilmen carried on drilling anyway.
Big Oil is used to doing things its own way.
The warnings have kept coming, but the boys from Exxon didn't listen. Oil Change International, 350.org, Carbon Tracker and many others in the #keepintheground movement have been saying for years that large swathes of oil reserves must stay in the ground.
They warned that fossil fuel reserves will become "stranded assets."
Exxon often dismissed its critics as irrelevant lentil-eating, sandal wearing hippies, who wanted to take humanity back to the stone age.
And it carried on drilling. And it dismissed the fact that any of its assets could become stranded.
But then came the Paris agreement on climate change last December. "With the Paris agreement on climate ratified in December 2015 … no company has more to lose than Exxon," noted the Chicago Tribune in a great article written last Friday entitled, Exxon enters no man's land.
The Chicago Tribune continued:
"Big oil companies have been solid investments for years, with a deceptively simple business model: Find at least as much new oil as you sell, book those barrels as future sales and reinvest in the hunt for new reserves. That made sense as long as oil prices went up, but it locked companies into a vicious cycle of replenishment, leading them to search for ever more extreme, and expensive, sources of crude oil in the Arctic and beneath the oceans."
And it added:
"Cheap oil has stopped that business cold and the threat of climate action raises fundamental questions about whether it'll ever be viable again."
The issue of long term viability has been raised by numerous organizations over the last eighteen months too. Last year the energy watch-dog, the International Energy Agency, argued that two thirds of known reserves would have to stay unburnt, if we are to keep climate change to the limits agreed in Paris.
But Exxon carried on drilling.
Last year Citigroup issued a report warning policies to limit climate change could render vast swaths of oil companies' reserves worthless, leading to trillions in losses.
But Exxon ignored the warnings.
In May this year, the London-based Chatham House warned in a report, entitled The Death of the Old Business Model, that the world's largest oil companies "Faced with the choice of managing a gentle decline by downsizing or risking a rapid collapse by trying to carry on business as usual."
Importantly, most of Exxon's de-booked reserves, about 3.6bn barrels, will be at the company's dirty Kearl oil sands project in Canada. The reduction would account for over three quarters of the reserves. Not only are tar sands very energy intensive, but they are expensive to produce.
In a low oil price, carbon-constrained world, they are stranded assets.
"For the oil sands, this is a tipping point," argued Andrew Logan, director of the oil and gas program at the ethical investment organization, Ceres. "Why would any company invest billions of dollars in a new oil-sands project now, given the near certainty that the world will be transitioning away from fossil fuels during the decades it will take for that project to pay back?"
Indeed, two days before Friday's announcement an article on CNN Money noted just how much trouble the oil giant was in: "Exxon's stock is down 17% from its 2014 peak amid the crash in oil prices. The oil giant's profits have plunged to 17-year lows and its once-perfect AAA credit rating has evaporated."
It quoted Tom Sanzillo, former deputy comptroller of New York State and now head of finance at the Institute for Energy Economics and Financial Analysis saying the company was in the middle of an "irreversible decline."
Friday's announcement is further evidence that we are witnessing the beginning of the end of the oil age.
And the great carbon dinosaur Exxon is slowly dying before our eyes.
Reposted with permission from our media associate Oil Change International.
Gardening the Seas to Save the World's Corals
As ocean waters warm and acidify, corals across the globe are disappearing. Desperate to prevent the demise of these vital ecosystems, researchers have developed ways to "garden" corals, buying the oceans some much-needed time. University of Miami Rosenstiel School marine biologist Diego Lirman sat down with Josh Chamot of Nexus Media to describe the process and explain what's at stake. This interview has been edited for length and clarity.
What is killing coral?
I wish we had an easy, straightforward answer for what's killing corals. We know there are many, many different factors influencing coral abundance, diversity, distribution and health these days, but I think the specific answer varies based on where you are.
Temperatures play a major role at global scales, and then you have all of these other, more local factors like disease, physical impacts of storms, or ship groundings.
Researcher Stephanie Schopmeyer prepares to out-plant Staghorn coral onto a Miami reef. Rescue-A-Reef, UM Rosenstiel School of Marine and Atmospheric Science
We had the dredging of the Port of Miami channel a couple of years ago and that caused a lot of localized mortality due to sediment burial and sediment stress. You also have land-based sources of pollution that can damage by location and nutrient influence that causes algal overgrowth of corals.
Local factors are superimposed on regional factors directly related to global climate change. Changes in temperature, more temperature extremes, acidification of the water, changes in storm frequency and sea level rise— all are at different scales — but they all combine to cause coral mortality.
Factors vary both spatially and temporally, but the outcomes are all the same. Regardless of where you are, we've lost a tremendous amount of coral.
Nursery-raised Staghorn coral out-planted onto a reef by a citizen scientist.
In the face of all those threats, can restoration work?
Historically, restoration was developed and used for acute disturbances. A ship runs aground, and so then there's a recovery, and funds are allocated to recovering the reef structure at a given location, and then corals are planted on top of that. But as global conditions decline for coral reefs, there's now a need to scale up. So, we're not just dealing with the localized impact—we're looking at species declining throughout their range.
We need other tools at larger scales, and that's where coral reef gardening has come into play, because it works at larger scales compared to just dumping cement and rebuilding reef structures, costly endeavors that recover just a very small footprint. We're growing and planting these organisms.
Do you worry about planted coral dominating the reefs?
Initially, these techniques were developed for fast-growing corals. The genus that we're focusing on, Acropora, is threatened, so these are very important reef-building species.
When abundant, they monopolize shallow environments. They form thickets, extensive areas of high-density colonies. That's the way they used to grow, until about three to four decades ago when they got wiped out by disease and other factors. The branching corals that we're working with grow between 10 and 15 cm per branch per year, so that's very fast growth.
Through recent advances in coral aquaculture, we're now also able to grow massive species, the ones that grow very slowly. Mote Marine Lab has developed microfragmentation techniques where they can cut coral colonies very, very small and make them grow very, very fast. Although we focused on branching corals initially, now most of the programs, especially here in Florida, are expanding onto other threatened species.
Citizen scientists plant coral. Rescue-A-Reef, UM Rosenstiel School of Marine and Atmospheric Science
Can these efforts solve the problem, or are they a placeholder until climate stabilizes?
You hit the nail on the head. One of the early criticisms of reef restoration was the scale issue and spending a lot of resources working on a very small footprint.
We've dealt with that now, over the past 10 years we've expanded to the point where we're growing thousands and thousands of corals—we're planting thousands and thousands of corals—so that issue of scale is no longer a valid criticism.
The other major criticism is that, even though we're planting a lot of corals, we're planting them onto environments where the same stressors that caused their initial mortality are in place. Now there is ocean acidification and increased temperatures, so things have gotten, in some cases, progressively worse.
Staghorn corals create a sustainable source of corals for use in restoration. Rescue-A-Reef, UM Rosenstiel School of Marine and Atmospheric Science
That is a valid concern if we were just planting corals, but we're not just doing that. We're still concentrating on all of the other aspects of reef restoration, setting up marine protected areas to protect fish stocks and coral impacts, working to curb land-based sources of pollution, and setting up sedimentation and nutrient controls. And then, on a much larger scale, we're all trying to curb carbon emissions, trying to limit the greenhouse impacts and acidification impacts. All these tools just help us buy time.
We're also doing a lot of genomics work to see how corals can increase their resilience. A colleague of mine here at the Rosenstiel School at University of Miami, Andrew Baker, is stress-hardening corals. He works on coral symbiosis, and he found that by applying a little bit of non-lethal stress, he can make corals shuffle their Zooxanthellae, which are the endosymbiotic microalgae that provide energy to the corals. In that process, they're able to uptake Zooxanthellae that are more thermally tolerant. So, through the forced shuffling of symbionts, you may be able to buy these corals one or two degrees of tolerance, so that they become more tolerant to bleaching in future years. That is cutting-edge science.
We're trying to actually find out what makes corals survive, and trying to beef up their defenses and their resilience over time. And that's because we have access to all these coral genotypes through the active propagation from coral gardening.
Reposted with permission from our media associate Nexus Media.
