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Professor Anthony Bryan

Caribbean countries must prepare for the eventual end of oil and gas as sources of power generation.

Professor Anthony T. Bryan, a member of the Caribbean Policy Consortium(CPC) told the Business Guardian that although President-elect Joe Biden’s energy plan will preserve a role for natural gas and LNG in the short run as a transition fuel, the long-term plan would invest heavily in renewable energy.

CPC is an expert group based in the Caribbean and North America.

Byran’s comments comes in wake of democratic presidential candidate Joe Biden’s ambitious energy plan.

Biden intends to launch a US $1.7 trillion ‘clean energy revolution’ and implement his vision for tackling climate change.

But if Caribbean countries do not prepare, the result, Byran explained, would be a difficult weaning process including for T&T which depends on natural gas and LNG for power generation.

Byran believes that the problem is that in the long run gas may prove to be economically and environmentally untenable within the power sector which is a key market for producers.

Even today LNG is still a dominant fuel source, but it is less competitive against renewables than it used to be, Byran said, adding that solar and wind are now cheaper than LNG power in two thirds of the world.

“And the proper combination of renewable energy policies could push gas out of the power mix by 2035 or earlier,” he added.

Bryan explained that once a global decision is made to place limits on greenhouse gas emissions from power-plants it would be harder for gas to compete against wind solar and other renewables.

“It is going to be much harder for natural gas and LNG to survive the push for decarbonization.

“The adverse implications for energy production and export for T&T and the Caribbean countries that depend on natural gas and oil for export is obvious. We can expect that eventually all electric power utilities will shift to renewables as their source of power generation,” Bryan advised.

A Biden energy plan also calls for a sharp increase in wind and solar generation and a drop in coal fired and nuclear power generation.

Byran added the US needs low carbon power options to meet more challenging decarbonization goals.

President Biden has committed to re-join the Paris Accord immediately upon taking office.

This, Bryan said, will signal that the United States wants to take the lead on climate change as it will invest $2 trillion in renewable power electric energy upgrades and green building initiatives and other clean energy initiatives.

This will eventually displace fossil fuels.

While fossil fuels will still be around for several more decades they will gradually be replaced by various types of renewables as power generating sources, Bryan noted.

Impact on global energy markets

Global oil and gas companies are preparing for a drastic change in energy consumption.

This will be in line with Biden’s initiatives to put the US on a net-zero carbon emissions goal by 2050.

Byran noted two reasons for the rapid advance toward renewables; firstly the oil and gas business has been a disaster for investors during 2020 regardless of the slight increases in the price of oil and COVID-19 accelerated this trend.

Secondly, faster growth in renewable energy jobs is being recorded now and expected to increase rapidly.

Less support for fracking?

Fracking — short for hydraulic fracturing — is a process for extracting natural gas by drilling thousands of feet into the ground and injecting a solution of water and chemicals through the earth’s crust to break up horizontal layers of shale rock.

Critics of the fossil fuel extraction method say its harmful impact on the environment outweighs its benefits.

Forbes recently reported that a Biden presidency is expected to follow through on his promises to ban hydraulic fracturing on federal lands and waters.

Bryan said Biden does not support new fracking projects but he can only ban new permits on federal land.

“That makes up less than 10 per cent of total land use for oil and gas production. Even so fracking will die a natural death in the US with the gradual transition away from oil and gas,’ Byran added.

He said eventually, a total ban on drilling by fracking would cut oil output in the US by 1.6 million barrels per day.

Difficult years ahead

Energy and strategic advisor Anthony Paul who is now based in Africa explained that generally, after the transition, Biden may have two difficult years for converting his policies into legislation, unless the Democrats can win the Senate with the Georgia run-offs.

If they don’t, Paul said, the Republicans in the Senate can stonewall him at every turn, rendering Biden to perhaps depend on executive orders.

“These have different levels of impact than do laws, so the extent to which he may be able to implement will be determined by his ability to get legislation passed,” Paul said, noting that Biden’s plans are to rejoin the Paris Agreement, reduce greenhouse gases and accelerate America’s embrace of and conversion to renewable technologies.

“America has a lot of installed old-generation infrastructure that is owned by these big firms and which are in the ‘harvest’ phase of their life cycle. In other words, the capital is paid off and now to reap the rewards. As with the mobile phone technology, some major American telecom companies persisted with less efficient CDMA system for many years, even as the rest of the world and technology moved on with GSM.

“In the same vein, don’t expect power plants running on coal, oil or gas to be retired far before their profitable life ends. Nor refineries, petrochemical plants, manufacturing with plastics and other petroleum derived products,” Paul said.

Noting that oil and gas make super profits, Paul said “big and powerful oil lobby” will not likely give that up too easily.

However, he said there are ways that Biden can slow the progress of oil and gas and promote renewables including limiting or halting the release of federal lands and waters for oil and gas exploration, changing the rules (as for flaring of natural gas) in others.

“The US’s share of gas flaring has increased tremendously in recent years with the production of gas associated with fractured oil reservoirs. A lot of these fields are remote from gas markets of pipelines, so producers choose to flare. These measures can push up oil and gas prices in the short term,”Paul explained.

He advised what must also be keep in mind that much of the fractured reservoir production comes from private or State owned (as opposed to federal owned) lands, which the President does not control.

Much of these lands are in States whose legislatures are controlled by the Republicans.

In response to Biden’s measures, oil producers can invest in the pipeline infrastructure and/or small scale conversion technologies to capture and sell/use much of this gas, Paul said.

Oil and gas prices

Low oil and gas prices have dramatically driven down the cost of oilfield services and equipment, Paul noted, adding that major companies have invested heavily in fractured reservoir production late in the game.

With their deep pockets and penchant for major projects, the majors have the potential of capturing that gas to feed power plants and export, Paul said.

“In so doing, they will also increase oil production and put pressure on prices. Both oil and gas exports will increase,” he explained.

Paul also advised that cheap and abundant gas availability will serve to support the conversion of existing power plants from coal or fuel oil to natural gas, thus preserving major infrastructure and capital.

“At the same time, Mr Biden can claim to have reduced GHGs. The impact on global oil and LNG prices could be dire,” Paul said.

On the foreign policy front, things are more interesting.

Paul said a key motivator of President Trump’s embargoes on Iran and Venezuela was keeping their oil off the market to create the space for American entry and domination of the global marketplace for oil and gas.

“With Saudi Arabia in their back pocket, President Trump saw it as a slam dunk. In spite of all the rhetoric, I would be surprised to see President Biden significantly roll back some of those aspects of Trump foreign policy, given the power of the oil and gas lobby in Washington. I hope I am wrong on this one,” Paul said, noting that he expects there to be major rolling back on the Cuban embargo.

“For the same reasons, the Iran nuclear deal will be revisited, but I’m sceptical that all the previous provisions will be quickly re-introduced. Look out for a slower release of oil on the market and investments in natural gas by the likes of French company Total.

“The measure of this will be the extent to which President Biden feels he has to assuage the angst the EU must be feeling.

I suspect he will propose policies that go further than the current Paris Agreement and landscape suggests. For instance, I suspect he will turn his attention to factors other than changing the sources of fuel, such as reducing the demand for fuel.

For instance, he may address the food supply chain, which is a big contributor to GHGs,” Paul added.

He suggested Biden could also redress some of the imbalances in the subsidy regime for ethanol, by giving incentives to farmers in the south where sugar cane can be grown and can also affect black communities much more than the corn subsidies further north.

Paul said in spite of its potential, he does not foresee the Caribbean status quo changing by becoming shapers of its own destiny and slowing climate change through its own initiatives and active participation, but rather by being the collateral beneficiary of policy changes to the north.

The biggest potential impact on the region could come from changes in foreign policy, Paul added.