Petroleum Extraction And Its Impacts On Climate Change

Historical Development of Saudi Arabia’s Petroleum Industry

On March 3, 1938, an American- owned oil well in Dhahran, Saudi was drilled and is now identified as the largest source of petroleum in the world. Oil accounts for more than 92% of the Saudi budget (National Geographic, 2014)

The oil and gas sector are, by a significant margin, the most important contributor to the Kingdom of Saudi Arabia’s economy, which traditionally runs a significant annual current account surplus, as well as a major source of the country's global financial and political influence. The Kingdom has some 265 billion barrels of proven and recoverable oil, accounting for up to a quarter of global oil reserves, and up to 258 trillion cubic feet of natural gas, the fourth-largest reserves in the world.

Legal Framework of Saudi Arabia’s Petroleum Industry

Since 1963 until 2004 extending to now, there has been a holistic approach towards environmental protection in Saudi Aramco. In 1963, the issue of the First Corporate Environmental Policy Statement was released by the Arabian American Oil Company to prevent pollution and other detrimental effects to the coastal waters of Saudi Arabia as a result of its operations.

The only multi-national organization in the Gulf is Regional Organization for the Protection of Marine Environment (ROPME). The objective of this organization is to coordinate the efforts of the Member States’ (Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates) to address many issues, but most importantly as related to this case study is to abate the pollution caused by the development activities of the member States.

Besides this, there are also an existing and comprehensive set of laws governing the field such as the Decree for the establishment of the Environmental protection Committee in Bahrain, the law protecting the Environment in Kuwait (1980), Iraq's Environment Protection and Improvement Act (1986), Act for Environment Protection and Pollution Control in Oman (amended 1985), Saudi Arabia's Environmental Protection Standards (PME) and, the Decree Concerning The Establishment of The Supreme Committee For Environment And Its Mandate In The United Arab Emirates.

Climatic Problems Arising from Petroleum Extraction in Saudi Arabia

The Arabian Gulf is the world's primary source for many things, but from the environmental point of view, primarily fresh water, seafood, and oil. The gulf is rich with many habitats that are actively inhabited by a wide range of flora and fauna, such as mangroves, seagrasses, coral reefs, and salt marshes. (Qurban, Joydas, Mani, Krishnakumar, & Wafar, 2011). The problem with protecting and maintaining the existence of these unique natural habitats arises because Arab Saudi is located within the richest oil reserves in the world which contains 21.9% of the world's oil reserves. To meet the rising energy demand around the globe, the conventional solution for this challenge is to increase production. One issue associated with the increased production is the extremely damaging effects on the environment due to the exploration, production, and distribution of oil.

The exploration and production of petroleum on its own lead to detrimental effects of the ecosystem. The sources of contaminants include formation water that has an oil content of 30 to 40 ppm, drilling fluid chemicals, oil and water based drilling muds and cutting, oil spilled during the extraction process, fuel oil from ships and equipment used in the production of oil and gas for commercial purposes and the flaring of associated natural gas, including methane and other light hydrocarbons (Qurban et al., 2011). Besides the process itself, coastal and offshore installations and constructions, laying of submarine pipelines, submarine cables, dredging, trenching and landfilling also creates contaminants. The same goes for oil spills (Qurban et al., 2011).

One instance where the extraction in The Gulf affects climate change is seen in the field of exploration and production. Drill wastes alter the sediment granulometry and cause burial and mortality of seabed animals. Contaminants like Barium and Petroleum Hydrocarbon (Ba and TPH) are toxic to marine life and the increased concentration of these properties in the tissue of marine organisms can cause harm to sea animals (Qurban et al., 2011).

Apart from this, the IPCC released a report warning that the world is warming quicker than expected. One consequence of this is the human beings might have to cope with an increasing amount of venomous bites, stings, and other brush ups with poison due to climate change as poisonous species may turn out to be normal in new ranges. Species affected because of hotter water include lionfish, ocean snakes, crown-of-thorns starfish and various distinctive sorts of venomous jellyfish (Learn, 2018). Meaning to say, a physical increase of harmful contaminants is only aiding this process and not in any way slowing down the detrimental effects of already actively happening climate-change.

Coastal and offshore constructions in Saudi Arabia in the field of petroleum extraction also involves the process of flaring primarily consists of the burning of fossil fuels which produces black carbon. Data shows that at present, Saudi Arabia ranks 14th emitting 118 million metric tons of carbon. A striking element of the time arrangement for Saudi Arabia is the outflows coming about because of flaring gas in the oil fields. In 1974, gas flaring represented 76% of Saudi Arabia's petroleum derivative discharges. As new advancements were consolidated into the oil fields and it wound up conceivable to refine or reinject these gases, CO2 outflows from gas flaring fell strongly and more as of late record for under 1% of aggregate discharges. Per capita emanations have grown ten times since 1950; at 4.69 metric huge amounts of carbon per individual, they are well over the worldwide average. (Carbon Dioxide Information Analysis Center, 2012)

Historical Development of Kazakhstan’s Petroleum Industry

Kazakhstan is a country covering approximately 2.7 million square kilometres. With a population of 18.3 million people, it is abundantly rich in natural resources such as petroleum. The historical development of oil and gas extraction in Kazakhstan began as early as 1899 with the development of the Ural-Emby pool oil field. Gradual development from geological researching subsequently led to the discovery of a set of oilfields in the regions of Atyrau, Aktobe, and Mangistau. Studies show that Kazakhstan's oil resources are estimated at several billion tons. In 1993, Kazakhstan produced about 545,000 bpd (barrels per day) and by 2004, production levels reached 1.18 million bpd. Between 1999 and 2004, oil production grew at an annual rate of 15 percent annum (Ministry of National Economy of the Republic of Kazakhstan, 2018). In crux, Kazakhstan's oil sector currently accounts for approximately 30 percent of gross domestic product and 57 percent total annual export revenues.

Legal Framework of Kazakhstan’s Petroleum Industry

The central government agency that regulates the development of oil and gas extraction is the Ministry of Oil and Gas. The ministry's principal obligation is to prepare tenders for the grant of rights to develop oil reserves, approves work programmes and assignment of rights over the subsurface (Kaiser & Pulsipher, 2007). Presently, The Subsurface Law is the primary legislation in regulating oil and gas activities. The primary purpose of the legislation is to grant rights for the usage of subsurface and set out the rights and obligations of subsurface users. Before 1999, Kazakhstan's policies surrounding petroleum extraction did not adequately address environmental or potential climatic impacts resulting from petroleum extraction as the country's primary concern at that time was attracting more foreign investors (Mitrofanskaya, 2000). In 1999 Kazakhstan's President Nursultan Nazarbayev shed light on the need for environmentally friendly technologies in petroleum extraction (Mitrofanskaya & Bideldinov, 1999). Subsequent to that, the newest legislation that ties petroleum extraction with the environment is The Ecological Code of the Republic of Kazakhstan (Environmental Code of the Republic of Kazakhstan, 2007). The code's focus is to establish the government's authority in regulating various aspects of the natural environment and set institutional relations with government departments (Derman, 1993). Article 94-10 of the code also stated inter alia, the use of renewable energy by legal entities on internal projects in Kazakhstan (Mills, 2014). The code also includes provisions related to climate change mitigation and adaptation methods and allows the operation of a national carbon trading scheme. Although Kazakhstan is performing moderately well on human development at the national level, there are solid inconsistencies at the regional level considering that just two of the fourteen districts of Kazakhstan are categorized as ‘Tier 1' in spearheading sustainable development (Partners, 2016).

Climatic Problems Arising from Petroleum Extraction in Kazakhstan

Kazakhstan has a continental climate with hot summers, harsh winters (strong snow showers and strong winds) and limited precipitation. A 2–3°C increase in surface temperature will decrease the vegetation cover, which is estimated to increase the occurrence of mudflow tenfold in combination with increasing heavy precipitation events and glacial melting. Mudflows are already threatening 156 towns and cities, including Almaty (the largest city in Kazakhstan). Kazakhstan's energy supply is vulnerable to the impact of extreme weather on its energy infrastructure due to an extensive electric and fossil fuel network as hydropower accounts for only 13 percent of Kazakhstan's electricity production (USAID, 2017). For example, flooding and mudflow in Almaty in 2015 caused considerable damage to power lines. Climate stress is added to the pressures of rising demand, low-efficiency transmission and distribution networks, and aging facilities.

Historical Development of Malaysia’s Petroleum Industry

The first oil well in Malaysia was sunk in 1910 by Shell on Canada Hill in Miri, Sarawak and by December 1910, it produced 83 bpd. In the late 1960s, foreign oil companies turned to the Malaysian Offshore Peninsula, and then Esso and Conoco received oil and gas concessions off the eastern coast of the Peninsula (Malaysian Development Bank, 2011). At the time of the establishment of PETRONAS (Established in 1974, Petroliam Nasional Berhad (PETRONAS) is Malaysia’s fully integrated oil and gas multinational corporation that is vested with the entire oil and gas resources in Malaysia.) , four of the nineteen oil fields in Malaysia were producing between 90,000 and 99,000 bpd. With Malaysia's growing economic nationalism culminating in the New Economic Policy (NEP) (Malaysia’s New Economic Policy (NEP) was announced in 1970 as part of a myriad of economic measures introduced after the political crisis in May 1969. Its objective is to ‘eradicate poverty’ and ‘restructure society to eliminate the identification of race with economic function’ in order to foster national unity.) , PETRONAS was incorporated as a public limited company. PETRONAS received its power from the 1974 Petroleum Development Act, a piece of legislation that granted PETRONAS ownership and exclusive rights and powers over Malaysian hydrocarbon resources.

Legal Framework of Malaysia’s Petroleum Industry

The main piece of legislation that regulates oil and gas extraction in Malaysia is the Petroleum Development Act 1974 (PDA) that was enacted in light of the 1973 global oil crisis. Subsequently, the government incorporated PETRONAS as a public limited company and in pursuant of the PDA, all ownership and its exclusive rights, liberties, powers, privileges to explore, win and obtain onshore and offshore petroleum in Malaysia is vested in PETRONAS. Thus, a company is required to enter into a production sharing contract (PSC) with PETRONAS in order to obtain the right to explore, develop and manufacture oil. Another vital piece of legislation is the Petroleum Regulation 1974 (Petroleum Regulation) that govern oil and gas exploration and production activities both onshore and offshore in Malaysia (Aziz, 2016, p. 166). Both legislations set out the licensing requirements for up and downstream activities in refining, marketing and distributing oil products. The transportation, storage, and handling of oil and oil products are under the purview of the Petroleum (Safety Measures) Act 1984.

Regarding its environmental protection policies, the Environmental Quality Act 1974 (EQA), is the central act that governs the protection of the environment and the prevention of oil spills and pollution on land and waters. However, the EQA does not extend its emphasis to sustainable development and renewable energy in tackling climate change. It was only in 2009 that the cabinet passed the National Policy on Climate Change (NPCC) (Ministry of Natural Resources and Environment Malaysia, 2010) that mainstreams the mitigation and adaptation of climate change in Malaysia in a cross-sectoral manner. The primary purpose of the NPCC is to spearhead climate resilient development in which it serves as a tool for harmonizing and integrating climate change adaptation and mitigation measures and disaster risk reduction measures.

Climatic Problems Arising from Petroleum Extraction in Malaysia

Despite the lack of statistical data on the climatic impacts arise from oil-drilling activities in Malaysia, research (Al-Amin, 2011) has shown that the increase of surface temperature in Malaysia will subsequently lead to a large proportion of the Malaysian population susceptible to the effects of extreme weather events such as droughts and floods that are associated with climate change. Without sufficient measures, change in the regional climate will cause floods and an increase in sea level could that could cause displacement of people and damaged infrastructures (Daud, Mohamed, & Abas, 2015). Besides, agricultural produce from eroded or inundated lands will be halted due to extensive flooding. Recent research has also shown that Malaysia is already facing the implications of agricultural production arising from climate change (Masud et al., 2014; cited in Flowers, 2017) such as Kelantan and Terengganu which are facing heavy climatic changes such as frequent rainfalls that has compromised agricultural productivity in those areas. Rice yields and oil palm plantation productivity will also be affected in Malaysia for every 1°C of temperature rise. With 29,000 square km of land in Peninsular Malaysia that is flood prone, such geographical vulnerability is directly placing 4.82 million people at risk of displacement, infrastructural and physical danger.

Government Mitigation of Carbon Emission through 80:20 Rule (Pareto Principle)

The cost related expense and any decrease in Net Present Value (NPV) should be weighed against both the ecological expense and potential reputational harm from an absence of alleviation. Some Liquefied Natural Gas (LNG) makers are as of now sequestrating carbon dioxide instead of venting, and comparable imaginative arrangements are required over the industries that emit carbon. Here the governments of countries that are actively involved in natural gas fields through legal frameworks should implement the 80:20 weightage principle in LNG handling, flaring, venting and fugitives.