UK: February 14, 2008


LONDON - Known oil, gas and coal reserves may already contain a quarter more carbon than mankind can emit and still avoid dangerous climate change, putting the value of new oil exploration in doubt, said a former oil major executive.


The oil industry may be wasting $50 billion annually searching for new fields, said Jan-Peter Onstwedder, formerly BP's most senior risk manager. He left BP in December.

He calculated potential carbon emissions from proven oil, gas and coal reserves at around 700 billion tonnes, compared with about 500 billion tonnes which can be emitted this century and keep temperature increases within less dangerous bounds.

"It prompts the question where does more exploration fit, do we already have all the reserves we possibly need?" he said.

"I don't know whether they thought their strategy through."

Onstwedder spent six years as global head of risk covering supply and trade in oil, gas and other commodities, and which account for most of BP's sales and purchases.

He spent last year on sabbatical coordinating 10 investment banks in a "London Accord" climate change research project meant to pin-point cheapest cuts in carbon emissions, published in December.

Record high oil prices have made it economic to extract oil from formerly unattractive reserves such as oil-rich sands in Canada, and Onstwedder's calculations raise the question whether finding new such reserves makes sense.

Still unexploited Canadian oil sands comprise 12 percent of the world's proven oil reserves, BP data show. Proven fossil fuel reserves are those already known and which are economic to exploit. Another class of "probable" reserves geologists know exist but extraction costs are unsure.

The United Nations' Intergovernmental Panel on Climate Change (IPCC) reported last year that keeping long-term warming to 2.0-2.4 degrees centigrade above pre-industrial levels meant mankind had to at least halve global carbon emissions by 2050.

The European Union warns that 2 degrees warming is a threshold for dangerous climate change.

Halving emissions meant limiting carbon emissions to about 500 billion tonnes of carbon this century, Onstwedder estimated.


LOCKED IN

Onstwedder's estimate was in line with academic studies.

Potsdam Institute climate scientist Malte Meinshausen calculated that mankind should emit no more than 400 billion tonnes of carbon this century to have at least a 50:50 chance of staying within 2 degrees.

A less ambitious goal of limiting warming to about 3 degrees would allow more than 800 billion tonnes carbon emissions this century Meinshausen calculated in a recent UN report.

After applying US government conversion factors, BP's annual energy review shows "locked in" carbon emissions of about 152 billion tonnes in proven oil reserves, 96 billion tonnes in natural gas fields and 455 billion tonnes in coal reserves -- or 703 billion tonnes in total.

Coal power plants could produce less carbon by pipeing emissions underground using carbon capture and storage (CCS) technology, but that is untried and so expensive that so far one pilot project after another has collapsed.

The US Energy Department two weeks ago shelved plans to support the "FutureGen" pilot plant because of cost overruns.

"The only reason you'd have to explore for more (oil) is if CCS works," said Onstwedder. "As an investor I'd ask how comfortable are you that CCS will work. I haven't seen oil companies answer that directly."


Story by Gerard Wynn


REUTERS NEWS SERVICE