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CERAWeek: Norway and Colombia expand fracking despite transition
Norway's Equinor and Colombia's oil and gas agency each plan to continue growing in unconventional oil and gas activity amid the energy transition, according to a pair of executives speaking in a multi-country panel at CERAWeek by IHS Markit.
But the operators reached similar decisions based on different strategic drivers - and this reflects the types of choices that oil companies worldwide are facing.
Norway's state-backed oil major Equinor is leveraging its upstream revenue to make the transition to technologies like blue hydrogen, according to Al Cook VP, development & production international, with Equinor.
Notably, blue hydrogen is in the mix. "In Equinor's case, we have one big low-carbon business around offshore wind, another big low-carbon business around carbon capture and storage and hydrogen production; they will look to draw on the cash flow generated from the upstream," said Cook.
Cook is also hoping that blue hydrogen demand will grow in the United States under the Biden administration.
Equinor recently sold some of its onshore US unconventional assets. The acquisition by Grayson Mill Energy included all of Equinor's operated and non-operated acreage in the Bakken field, spread across the US states of North Dakota and Montana, according to a 10 February statement.
"We are moving away from our operation positions, but we will continue to have a large non-operating position, and indeed will continue to grow in areas of unconventionals, alongside really great operators. In the US, we work with Chesapeake and Southwestern, and other great American companies in Argentina, we work with YPF, in Russia with Rosneft, and so forth," Cook said.
Historically active on the Norwegian Continental Shelf, Equinor aims to develop more business offshore, where the company has competitive strengths. It will focus on places like the UK, Brazil, Canada, and the Gulf of Mexico, said Cook.
"I think what we're trying to do here is very be very honest and modest about what we're good at, and also ambitious about the right thing," he said.
"We certainly believe that this is all about being high value, and low carbon. And the businesses that lose out will be those that focus purely on value without considering carbon, and those that lose will be purely those that focus on low carbon but forget about value."
Tax breaks have encouraged oil and gas investors, even despite last year's low oil prices, but Norway has the highest carbon taxes on the oil and gas industry in the world. These could be increased in the future, he said, further driving a change in Equinor's strategy.
Colombia speeds fossil fuel investment offshore
Colombia is focusing on building its attractiveness to fossil fuel investors before the energy transition "window" closes, according to the president of the Colombian government's National Hydrocarbons Agency, Jóse Armando Zamora Reyes.
"For the next three or four decades, even in the most pressing scenarios, the world needs … the hydrocarbons, even in these very important energy transition times that we are living in," Reyes said.
Colombia is open for business, especially investment in unconventional offshore areas, he said. "We are undertaking a full review of our offering from the contract to the bidding rounds, to all the administration processes, the availability of information, and we are building on the position in that we have been able to gain as a number one in terms of attractiveness, for stability of contracts in fiscal terms and for the respect of the rule of law. Also, because we have been able to see the potential that we have in new horizons like offshore and the unconventional onshore, and on new geological concepts in Colombia," Reyes said.
Economic and social factors are driving the decision, he said. "We see that what we have is a window of opportunity; we need to take advantage of the potential for development for generating income. And otherwise, our endowment will remain with the operators, and the society will not benefit from that opportunity," said Reyes.
"We want to boost the pace of investment in order to take advantage of the window of opportunity that I just mentioned," he said.
Investors in Colombia oppose carbon taxes, and the COVID-19 pandemic and financial crisis was not a moment to challenge them. "We always look up to Norway as a very good model for taxation because it, you know, observes the main principles of taxation, which is neutrality," said Reyes.
"What industry is asking from us at the moment, and this is very telling, is that we leave the taxation system, the fiscal system, as it is. And we are going to leave it as it is because it is good enough, even in the current circumstances. We could say last year it was used to end the crisis."
European major Shell, which has declared a net-zero target, is among those that are making investments in offshore unconventional fossil fuels in Colombia. "We also have Exxon, which is a considering very seriously going into the … projects, or unconventionals, we have a good cross-section of companies: big, medium, and small," said Reyes.
In December, his agency approved the Colombian oil and gas company Ecopetrol's sale to Shell of 50% interest in three Colombian deepwater gas blocks, including the Kronos, Purple Angel and the Gorgon wells, according to an IHS news brief.
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