Oil companies are asking themselves if it is worthwhile to look for oil anime

Photographer: William H. Edwards / Getty Images

A few dots near the bottom corner of the world map in the southern Atlantic Ocean, the Falkland Islands once stood at the forefront of a new era for the oil industry, as companies saw the planet as a source.

Yet a decade after the discovery of as many as 1.7 billion tons of raw material in surrounding waters, the British overseas territory known for sheep breeding and tension with Argentina looks as far away as ever. Rather than the next limit, the project to extract energy risks is added to a list of what companies call “stranded assets”, which can cost them huge sums for motball.

As de coronavirus destroys economies and requires rape, European oil killers have made some awkward permissions in recent months: oil and gas worth billions of dollars may not be pumped out of the ground.

As the crisis also accelerates a global shift to cleaner energy, fossil fuels are likely to be cheaper than expected in the coming decades, while emitting the carbon they contain will become more expensive. These two simple assumptions mean that ticking in some fields no longer makes economic sense. BP Plc said on August 4 that it would do not explore any more in new lands.

The oil industry was already struggling with the energy transition, many supply and signs of peak demand when Covid-19 began to spread. The pandemic is likely to bring that highlight forward and discourage exploration, according to Rystad Energy AS. The consultant estimates that about 10% of the world’s repaid oil resources – about 125 billion barrels – will become obsolete.

“There will be beach assets,” he said Muqsit Ashraf, senior manager director responsible for the global energy industry at Accenture Plc. “Companies will have to accept the fact.”

The Sea Lion project in the Falklands has promised to be a world-class resource when Rockhopper Exploration Plc took the field in 2010. Hundreds of millions of dollars later and after a flare-up between Argentina and Britain over the legality of the project, the first phase has not yet brought oil to market.

Premier Oil Plc, Rockhopper’s partner, suspended its work on Sea Lion earlier this year, writing off $ 200 million in investments on July 15 because later phases were unlikely to happen.

Larger companies have also begun to vote on that realization for other projects. BP said in June it would evaluate its portfolio of discoveries and leave something undeveloped. Head of State Dominic Emery last year already questioned what kinds of sources “never see the light of day” might see. Complicated projects could be shelved in favor of fields that are faster to develop, such as U.S. shale, he said.

The pressure to reduce emissions could also encourage companies to dump the most carbon-intensive reserves, as France’s Total SE acknowledged last month when it took a $ 8 billion write-down on carbon-heavy assets.

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The list of projects most at risk includes deepwater discoveries from Brazil, Angola and the Gulf of Mexico, said Parul Chopra, vice president for downstream research at Rystad. Canadian oil sands projects such as the expansion of the Sunrise development in Alberta are also in doubt, he said.

The Sunrise bond, a joint venture between BP and Husky Energy Inc., has a large supply of bitumen – potentially up to 3.7 billion barrels. Extraction, however, is complicated. Most oil sands projects are similar to mining activities. The bitumen is dug out of the ground and processed into heavy raw material, which must then be removed with lighter hydrocarbons before it can be refined into fuel.

Sunrise is more complex and expensive. The deposit is too deep to dig, so instead it is injected with steam to flow the bitumen into a well, where it can be pumped to the surface.

Sunrise was intended to be built in three phases, and eventually produced more than 200,000 tunnels of bitumen per day over 40 years. The first stage of 60,000 barrels a day began in 2015, just as crude prices were falling amid the first U.S. scale boom. Since March this year, production has shrunk to about 10,000 a day, net to Husky, amid falling prices and pipe capacity restrictions.