Friday 29 Mar 2024
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KUALA LUMPUR (Dec 17): More than 600 billion barrels equivalent of the world’s commercially recoverable oil and gas reserves are facing high or extreme risks from more frequent storms and floods, rising sea levels and temperature extremes.

In its Climate Change Exposure Indices released on Thursday (Dec 16), risk consultancy Verisk Maplecroft said Saudi Arabia, Iraq and Nigeria are among the oil and gas producing countries where the risk of climate-related events disrupting the flow of oil to global markets is the highest.

It said that among them, these three countries account for nearly 19% of commercially recoverable oil and gas.

Verisk Maplecroft said climate-related supply threats to the oil and gas industry had already begun to manifest.

It said this year, a freeze in Texas knocked US oil and gas output to a three-year low, while Hurricane Ida caused a record 55 spills in the Gulf of Mexico and created historic disruptions to the supply of both crude oil and refined products.

Record heat in Russia accelerated the melting of permafrost, a trend that had damaged 40% of buildings and infrastructure in northern regions heavily reliant on oil and gas production, it said.

Verisk Maplecroft said by combining subnational onshore and offshore Climate Change Exposure Indices with asset-level data from its sister company Wood Mackenzie, it zeroed on the oil and gas assets most exposed to the physical impact of climate extremes up to mid-century.

It said the data shows that onshore oil and gas operations are exposed to the full range of the physical impact of climate change, including rising sea levels, storms, heatwaves, flooding and other extreme weather events.

“Offshore operations, such as in the Gulf of Mexico, on the other hand, are vulnerable to tropical cyclones and extreme wave heights.

“In total, 10.5% of global commercially recoverable reserves are found in areas rated as extreme risk in the Climate Change Exposure Indices, while 29.5% are at high risk.

“This amounts to around 617 billion barrels equivalent,” it said.

The report added that the Middle East and North Africa region is not only home to the largest reserves in the world, but also with the highest proportion of reserves at risk.

It said Saudi Arabia’s long-term economic strategy rests on leveraging its low lifting cost and low upstream carbon intensity, especially as the oil majors come under pressure to reduce output.

“But uncertainty over the trajectory of oil and gas demand over the coming decades aside, Saudi Arabia’s severe exposure to heat stress, water shortages and dust storms stands out as the Achilles heel in this strategy,” it said.

Verisk Maplecroft said companies with reserves in locations highly exposed to the physical impact of climate change will face more disruptive events, potentially higher cost of extraction and the need to invest in mitigating actions.

It said production may have to be halted and a plant secured to allow for the passage of tropical storms — or coastal infrastructure will need to be raised to account for storm surges and rising sea levels.

Risks of accidents and spillages in ecologically sensitive locations could also increase as pipelines are exposed to more extreme weather events that they may not have been designed to withstand, it said.

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