Oil carbon intensity impacts of COVID-19 and other short-term demand shocks

Oil production choices are influenced by the interaction of oilfield production costs and the global price of oil. What are the characteristics of less economic oilfields, fields whose profitably is at the margin? These oilfields may differ from average fields in terms of geographical location, crude type, production practices, and carbon intensity (CI). Because these economically-marginal fields are the ones likely to respond to drop in demand (e.g., due to 2020 COVID-19 pandemic, or a rapid shift to alternatives), they represent the likely sources of oil that would be displaced. The present paper links the field-by-field costs of 1933 oilfields (representing ~ 90% of 2015 worldwide crude production) with their production environmental footprint. We show that many marginal fields also have high CI. We estimate that the fields at margin due to the 2020 COVID-19 pandemic demand reduction have upstream CI and marginal cost of production ~ 35% and 3 times higher than global average, respectively. The production termination of these fields could result in 181 Mtonne CO2Eq. annual reduction in upstream emissions in the short-term. The marginal producers in a generic small demand shock (5% or ~ 3.6 mmbbl/d drop) have an upstream CI 26% higher than average global oil producers, and at our larger generic demand shock (20% or ~ 14.3 mmbbl/d drop) have CI that is 5% higher than average. Heavy oilfields have the highest volume share in marginal crudes in all scenarios. These results further suggest that life cycle benefits of alternative fuels or vehicles or regulations that lead to reduced oil consumption are systematically larger than those typically estimated when displaced emissions are modeled using average crudes. The results only cover the upstream production CI and do not include synergistic impacts of differences in refining CI of different types of crudes, and thus could underestimate the total life cycle differences between marginal and average crudes.