LONDON (Reuters) – There’s oil and then there’s oil, says Norway’s Statoil, which is pitched in a race to develop the cleanest crude as countries wean themselves off fossil fuels.
While the world will need oil and gas for decades to come, Statoil’s Chief Executive Eldar Saetre expects that many oil deposits will never be tapped as increasingly discerning consumers will demand only the lowest-polluting crude.
“A lot of fossil fuels will have to stay in the ground, coal obviously … but you will also see oil and gas being left in the ground, that is natural,” Saetre told Reuters in an interview in London.
“At Statoil we are not pursuing certain types of resources, we are not exploring for heavy oil or investing in oil sands. It is really about accessing the most carbon-efficient barrels.”
Around 70 percent of the world’s discovered oil resources is heavy oil and bitumen, both highly viscous crudes that are more complex and energy-intensive to extract and process than lighter crude, according to the U.S. Geological Survey.
The comments from a senior oil executive may raise alarm bells for oil-rich countries such as Venezuela and Canada that mostly produce heavy oil.
The retreat from energy-intensive oil production in Canada and elsewhere is already taking place.
Statoil sold its entire Canadian oil sands business late last year to Athabasca Oil Corp, and Royal Dutch Shell, ConocoPhillips and Marathon Oil have all scaled back their operations in the country.
Statoil is now exploring for new resources offshore Norway and Brazil where oil is lighter and abundant.
“The world needs to develop more efficient barrels… Competitiveness to me is carbon competitiveness and cost competitiveness,” Saetre said.
Shell, Exxon Mobil and France’s Total have also invested billions in recent years in Brazil’s oil wealth, and companies are vying to discover and develop resources in other light-oil provinces such as the North Sea as well as shale basins in the United States.
Growing pressure from investors on oil companies to reduce their carbon emissions, is propelling the trend – highlighted last week when Norway’s trillion-dollar sovereign wealth fund announced plans to cut investments in oil and gas companies.
“Investment sentiment towards carbon is starting to harden and it does need to be part of the decision making,” said Tom Ellacott, senior analyst at consultancy Wood Mackenzie.
“There is an economic perspective as well with the risk of future carbon taxes which you are more likely to be impacted by if you have a carbon-intensive portfolio,” Ellacott said.
Saertre was speaking to Reuters before the announcement by Norway’s sovereign fund, which is not allowed to invest in Norwegian-listed companies including Statoil.
The world’s leading offshore oil and gas operator, Statoil is at the forefront of the sector’s drive to reduce carbon emissions and play a role in the transition to renewable energy such as wind and solar.
The Stavanger-based company and its peers including Shell, BP and Exxon are also betting on natural gas to displace more polluting coal to produce electricity.
Saetre, 61, has led Statoil since October 2014, setting the most ambitious targets among the world’s top oil companies to invest 15-20 percent of its capital expenditure on clean energy by 2030.
Still, it will continue to focus primarily on oil and gas production for decades to meet demand, Saetre said.
The company is developing one of the world’s largest oil discoveries in decades, the Johan Sverdrup field offshore Norway which is expected to begin production by the end of 2019.
Statoil has also invested in shale, but Saetre said it had no plans to increase its production in U.S. shale formations, which stood at around 225,000 barrels of oil equivalent per day.
The resurgence of unconventional shale production in the United State since the start of the decade was a key factor behind the sharp drop in oil prices since 2014. Its vast potential resources and production flexibility are expected to limit any gains in oil prices as global supplies return to normal levels.
Saetre, however, said that bottlenecks in the U.S. shale supply chain, such as a shortage in crews and rigs, as well as funding issues could impede growth in production.
“I would have expected to see more response from the shale at a price of $55-60 a barrel than we have seen,” he said.
Editing by Veronica Brown and Susan Fenton