x Abu Dhabi, UAEMonday 22 January 2018

Quest for 'extreme oil' leaves nations blind to the risks

Environmentalists are now increasingly concerned that, in an effort to satisfy the world’s growing appetite for oil, the exploration industry will cause untold damage to maritime and other environments.

The threat posed to the world's environment by oil has grown radically since the start of the century, prompting politicians and investors once again to re-examine viable alternatives to fossil fuels.

The extent of the destructive exploration involved in drilling new sites and the resulting dangers have resulted in "extreme oil" being extracted from new, hard-to-drill fields of the 21st century. There are now escalating fears of a dangerous accident as new drilling starts in inaccessible regions such as the Arctic. Environmentalists believe that the fallout from such a disaster would be almost impossible to control.

Late last month, the US government approved Shell's oil response plan for the Beaufort Sea in the Arctic. Greenpeace says the area is a "remote expanse of ocean that must count as one of the most wild and untouched places on Earth".

Environmental protection groups fear that the US government has already forgotten the lessons so expensively learnt when the Exxon Valdez oil tanker ran aground in 1989, spilling hundreds of thousands of barrels of crude oil into the Alaskan environment.

The response plan that has just been approved by the US government has been heavily criticised by Greenpeace. The environmental group accuses Shell of relying on unproven technology and an unfounded confidence, in light of past events, that the worst will never happen.

With the global consumption of oil growing rapidly and petrol prices on the rise, the exploration industry is increasingly turning to extreme oil. There is growing pressure from the world's petrol pumps to increase rather than decrease the global dependence on oil.

According to The Economist, global demand for oil is set to hit 800,000 barrels a day this year. At the same time, demand from developing economies such as China and India has driven prices of Brent crude to a record US$120 (Dh440) a barrel.

In their effort to meet this growing global demand and cash in on rising global oil prices, oil companies are tapping new fields as never before. New drilling techniques have, for instance, enabled the release of what is called "tight oil" by the industry in the shale rock of Texas.

Another example is a field underneath 1,500 metres of salt rock in the Atlantic Ocean, almost 300 kilometres east of Brazil's capital, Rio de Janeiro. This potentially vast reserve is being drilled by Petrobas, the Brazilian state-run oil giant.

Environmentalists are now increasingly concerned that, in an effort to satisfy the world's growing appetite for oil, the exploration industry will cause untold environmental damage to maritime and other environments, which were hitherto safe.

They also fear that unless the world starts to adopt cleaner energy policies, the routine pillaging of the planet's resources and the inevitable drilling and tanker accidents could cause irreparable damage to the world's ecosystem.

But there is also evidence that senior politicians are beginning to grasp that the longer-term effects of 21st-century oil exploration are very different from those of the more limited and controlled drilling in the 20th century.

Earlier in March, at the unveiling of a new $1 billion alternative vehicle programme, US President Barack Obama referred to oil as a "fuel of the past". The goal of his National Community Deployment Challenge is to make electric vehicles as affordable and practical as today's petrol-powered vehicles by 2020.

Calling on Congress to provide grant money to encourage the use of fuel-efficient technologies, Mr Obama said: "We've got to develop every source of American energy - not just oil and gas, but wind power and solar power, nuclear power and biofuels."

Mr Obama's comments appear to belie his decision, later in March, to approve Shell's Arctic response plan. But the US is gradually adopting the goal of one day becoming energy self-sufficient. In fulfilling this aim, Mr Obama is capable of simultaneously endorsing eco-friendly energy projects while embracing environmentally disastrous extreme oil in the hope that a combination of the two might begin to end US dependence on oil imports.

But while politicians hedge their energy bets, investors can help to tip the balance between a future of extreme oil or one of renewable energy. By avoiding buying shares in energy companies like Shell and investing in electric-vehicle makers such as Tesla Motors, the California-based luxury electronic-car manufacturer, or in solar and wind-power projects, investors can encourage industry and consumers to switch to cleaner fuels.

Investment in alternative energy technologies will also exploit extreme oil's main weakness: its high cost. As long as the world is dependent on petrol, the oil industry will go to any extreme to supply growing global demand.

But once investment in alternative energy begins to provide consumers with cheaper options than oil, senior politicians such as Mr Obama will start to feel less comfortable about sitting on the environmental fence.