How climate-related extreme weather puts oil and gas assets, production at risk

Suncor Energy Inc. revenge a disclosure archive past twelvemonth laying retired what would hap if extreme weather were to unit a 10-day shutdown of its monolithic Base Plant oilsands excavation successful bluish Alberta.

The archive — which Suncor revenge pinch CDP, a world non-profit that maintains a database connected firm biology action and ambiance consequence — specifications nan financial consequence to nan institution posed by specified a scenario.

While nan likelihood of utmost upwind events remains “unknown,” Suncor said successful nan archive that a 10-day Base Plant shutdown could costs nan institution $56 cardinal per time (more than half a cardinal dollars successful total) successful nan shape of mislaid gross owed to accumulation losses.

When analysts talk astir nan lipid and state sector’s vulnerability to ambiance change-related risk, they often travel astatine it from a argumentation aliases request forecast perspective. They look astatine nan consequence that ambiance alteration will punctual governments to enforce much regularisation connected nan fossil substance sector, aliases that nan power modulation will lead to a diminution successful request for lipid and gas.

But nan lipid and state sector, for illustration each industries, is besides exposed to ambiance consequence successful a beingness sense. That consequence has been hammered location this month, arsenic out-of-control wildfires successful bluish Alberta forced respective Canadian oilsands companies to evacuate non-essential workers from their sites. Suncor itself, Canada’s second-largest oilsands shaper by volume, has temporarily curtailed accumulation astatine its Firebag analyzable owed to nan occurrence danger.

Also this month, Hurricane Beryl forced nan impermanent shutdown of offshore lipid platforms on nan U.S. Gulf Coast, 1 of North America’s astir important regions for power resources and infrastructure.

“Oil and state infrastructure, for illustration everything else, has been progressively exposed to terrible upwind events fuelled progressively by ambiance change,” said Craig Stewart, vice-president of ambiance alteration pinch nan Insurance Bureau of Canada.

“We’ve seen it each nan measurement backmost to Hurricane Katrina, which disrupted activity successful nan Gulf of Mexico backmost successful 2005. We saw it successful nan Fort McMurray occurrence successful 2016, wherever lipid and state assemblage aliases oilsands activity was disrupted for a period … and we’ve seen it elsewhere successful nan world arsenic well.”

More than 40 per cent of nan world’s commercially recoverable lipid and state reserves are highly exposed to nan effects of ambiance change, according to a 2021 study by consequence intelligence institution Verisk Maplecroft. The study pointed to that year’s heavy frost successful Texas that knocked U.S. lipid and state output to a three-year low, arsenic good arsenic nan effects of Hurricane Ida, which caused a grounds 55 spills successful nan Gulf of Mexico and created historical disruptions to nan proviso of some crude lipid and refined products.

Refineries, drilling rigs, export terminals and pipelines are besides susceptible to flooding, tornadoes and moreover drought, which has nan imaginable to limit nan magnitude of h2o nan manufacture tin tie connected for processes for illustration hydraulic fracturing. And each of these upwind events are becoming much common, Verisk Maplecroft said.

“These types of events are going to go much predominant and much extreme, creating moreover greater shocks wrong nan industry,” nan study stated.

There’s large money successful lipid and gas, which intends location are millions of dollars astatine play each clip a tropical large wind rears its caput aliases a refinery trips disconnected during a power wave. If upwind knocks retired a important magnitude of a jurisdiction’s lipid output, it tin origin impermanent commodity value spikes that trickle each nan measurement down to nan consumer.

For example, astir half of nan full petroleum refinery capacity successful nan U.S. and 51 per cent of that country’s full earthy state processing works capacity is located on nan Gulf Coast.

Earlier this year, nan U.S. Energy Information Administration warned of nan imaginable for a “particularly intense” hurricane play successful 2024, suggesting location is simply a heightened consequence of weather-related accumulation outages.

The EIA has besides said a “high-impact” hurricane that importantly disrupts U.S. lipid accumulation could summation monthly mean unit gasoline prices by up to 30 cents US per gallon.

In Canada, nan largest oil-producing region is nan oilsands, located successful nan boreal wood of bluish Alberta – an area highly prone to wildfires. Thousands of oilsands workers were evacuated successful nan 2016 wildfire that destroyed portion of nan organization of Fort McMurray, forcing companies to trim their lipid output by a cardinal barrels per day.

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The resulting economical effect was truthful terrible that Canadian GDP contracted 0.4 per cent successful nan 2nd 4th of 2016. Economists opportunity GDP would person grown 0.1 per cent that quarter, excluding nan effect of wildfire connected Canadian lipid production.

Thomas Liles, vice-president of upstream investigation for Rystad Energy, said while that arena took spot much than 8 years ago, it remains caller successful nan minds of many.

“From nan industry’s perspective, there’s still a batch of scarring from nan events successful 2016,” he said.

Environmentalists opportunity it’s ironic that nan fossil substance assemblage is being affected by ambiance change-related disasters, moreover arsenic it makes plans to proceed to turn lipid and state output successful nan future.

“They’re conscionable throwing substance connected nan fire,” said Keith Stewart, elder power strategist for Greenpeace Canada.

“These companies person business plans that are going to make utmost upwind moreover much extreme.”

But Liles said while nan consequence remains, nan power manufacture is amended prepared for weather-related disasters than it was a decade ago. Companies person spent years processing elaborate emergency consequence plans to protect their workers and their assets.

“I deliberation nan manufacture astatine ample is beautiful utilized to judging risks and dealing pinch those accordingly,” he said, adding that moreover if utmost upwind intensifies successful nan years to come, it’s improbable to dissuade companies from investing successful lucrative areas for illustration nan oilsands aliases nan Gulf of Mexico.

What fossil substance companies are progressively doing, said nan IBC’s Stewart, is seeking security sum to protect them against not conscionable beingness nonaccomplishment and damage, but against nan impacts of business interruption successful nan arena of utmost weather.

So far, they person had “varying” success, he said.

“Reinsurers person reduced their vulnerability to nan commercialized marketplace successful Canada complete nan past 5 years owed to nan increasing threat of climate-driven disaster,” Stewart said, adding that getting security successful wildfire-prone areas for illustration nan boreal wood is becoming progressively difficult for businesses.

“Any operations, whether lipid aliases state aliases thing else, that are located successful those areas are going to person difficulty.”