Does the Oil Industry Have a Future? (Part I)

By Julián Salazar Velásquez -- January 24, 2023

Ed. note: Julián Salazar Velásquez is a geologist and petroleum engineer with a nearly 50-year career in the Mexican and Venezuelan oil industries. A leading educator and proponent of free market energy, he is author of numerous articles and Gerencia Integrada de Campos de Hidrocarburos (2020), a primer on the oil industry value chain. His four-part world view starts today and continues this week in Part II, Part III, and Part IV.

The current depiction of the oil and gas industry is not only incorrect but worrying. In the more than two years that I have been educating at conferences, in courses, in articles, and in my book—I have seen how unsound dogma threatens progress and prosperity in our countries.

Background

In December 2021 in Petroleum Magazine, I published “Energy Transition or Transgression? What to do in the face of the global campaign against the oil industry with the political threats of anti-fracking and global warming?”

I gave a talk on the article at the Venezuelan American Petroleum Association (VAPA), Venamerica, and “Colegio de Ingenieros de Venezuela—Monagas” (CIV-MONAGAS). The conference title–“The two great current threats to the oil industry: anti-fracking and global warming”–refers to legal prohibitions based on unfounded catastrophic environmental impacts.

The alleged danger of CO₂ emissions from fossil-fuel usage has been propagated in a large part of public opinion and institutions. I warned about the anti-oil and gas campaigns and demonstrations that have grown in Europe, Canada, USA, and Latin America against fossil fuels, even in support of bans which would represent devastating results for the future of humankind. In fact, mineral fuels and petrochemical derivatives have encountered prohibitions, not only for the exploration and production of unconventional shale deposits but in activities across the value chain of the hydrocarbon industry.

In the 2017 edition of my book Gerencia Integrada de Campos de Hidrocarburos, I saw these threats as something temporary. I was optimistic when I reflected on the question: Does the oil industry have a future? On that occasion I mentioned with conviction:

I can state with high probability of certainty that this sector will continue to expand to meet the growing demand for energy, so that oil and gas will continue to represent the most widely available source at the lowest cost. On the other hand, alternative energy sources will grow in parallel, sharing the market as they become more competitive.

Five years later, I now see that things have turned for the worse. Not only has the anti-oil and gas position become more radicalized, but the actions of the international political leadership are flagrantly supporting energy generated by wind and solar. Most recently, the activists are trying to establish barriers in the international financial system against oil, gas and coal, based on “net zero strategies, decarbonization, green energy, renewable energy and energy transition,” with the argument of saving the planet from the supposed negative of “global warming,” or as it is now called “climate change.”

The international protests in Europe, USA, Canada and Latin America, (Figure 1) have had the support of the governments and radical environmental organizations, supported by left-leaning political groups. Hence their radius of action has been increasing, with strong influence on governmental and non-governmental institutions of civil society, as corroborated by the following detrimental results:

• Prohibitions and moratoria on activities for the exploration and exploitation of unconventional shale deposits in Europe, Mexico, Costa Rica, Colombia and some states of the USA and Canada. Oil and gas are only produced from this type of deposit in the USA, Canada, Argentina and China.
• Stoppage of the 1,700-mile Keystone XL Pipeline by the US through an executive order. This project was built in order to transport 830 thousand barrels per day of crude oil from the oil sands of western Canada to the refineries in Texas.
• Promise to stop all oil exploration activities, both conventional and unconventional in Colombia by the left-wing candidate, and a ban on fracking, which is already in its implementation phase after winning the presidency in June 2022.

• Proliferation of campaigns against the industry and oil usage by radical environmental groups, financed by non-governmental organizations that have influenced the policies of countries against the use of fossil fuels. (Figure 2)
• Increases—after the pandemic and the start of the Russian-Ukrainian war—in the prices of oil, gas and its derivatives, given the decrease in production and increase in demand, with the subsequent global energy crisis; also, short-term problems for energy supply in this winter of 2022 in Europe and North America. 

(To Be Continued in Part 2)