Just 1m of SLR will impact 42% of global crude exports & 45% of imports…

…IPCC warned 2m of SLR by 2100 “cannot be ruled out”

According to the report, rising seas of 1m will submerge six key oil export ports which serve four of the Top 10 crude oil exporters as well as swamp seven key oil import ports which serve four of the Top 10 crude oil importers. The key oil transit hub of Singapore is also not immune.

Yet, the IPCC warned in 2021 that 2m of SLR “cannot be ruled out” by 2100 and CWR’s report finds a further two tanker terminals (Suez and Said) impacted at these levels.

“The consequences are far-reaching. Just 1m of sea level rise has the potential to disrupt up to 42% of global crude exports from Saudi Arabia, Russia, US and UAE as well as up to 45% of global crude imports to China, US, South Korea and the Netherlands. Oil exporting countries and nations reliant on oil imports by sea as well as oil majors must start factoring in sea level rise. Delaying oil transition will only accelerate rising seas, shooting the sector in the foot” warned Debra Tan, Head of CWR and lead author of the report.

Some coastlines already saw x3 avg rate of SLR…

…acute danger for ~900mn living in low elevations zones = 1/10 people on earth

There is certainly cause for concern as key drivers of rising seas – warming oceans and polar ice sheet losses – are experiencing record-breaking temperatures and unimaginable melt today. Already, seas are rising faster than expected. Last year, UN Secretary General, António Guterres expressed concern that “some coastlines have already seen triple the average rate of sea level rise.” He’s worried, “the danger is especially acute for nearly 900mn people who live in coastal zones at low elevations – that’s one out of 10 people on earth.”

Dr CT Low, CWR’s Geospatial Risk Lead and co-author of the report noted that accelerated warming and rapid ice loss from Greenland and Antarctica are already running well ahead of projections. “Many ice sheet scientists have said they never thought they would see this level of melt in their lifetimes” he said. In fact, ice experts sounded the alarm in the latest State of Cryosphere 2023 Report released ahead of COP28 – they say that “2°C is too hot for ice” and the only way to ‘slow down’ rising seas is to stay within 1.5°C.

6 years left to deliver GHG emissions cuts to stay within 1.5°C…

…yet, near-term oil production is growing – US oil add from 2022-28 = Iran’s crude oil production…

…ice already in danger zone at 1.5ºC – 2ºC is too hot

Yet, near-term global oil production is still growing. The latest IEA report noted that almost half of the increase is led by the US, which is slated to add 2.6mn b/d between 2022-2028. Tan says that such oil expansion and growing emissions will only speed up rather than slow down rising seas. “We have six years left to deliver greenhouse gas emission cuts of around 24GtCO2e to stay within 1.5°C. So, sizeable near-term oil expansion plus insufficient emission cuts will be deadly for coastal populations. What’s sizeable is the US’s oil add from 2022 to 2028 – it is equivalent to the entire crude oil production of Iran” explained Tan.

Tan further elaborated that our current climate policy path of 3°C means that we could see rapid SLR in around 30 years’ time and a shocking 2-3m by 2100. “Because there is no “undo”, overshooting 1.5°C will commit us to multi-metre SLR. So, this last hurrah to pump more oil led by the Americas could well trigger ice tipping points and unleash unstoppable rising seas, which will not only sink key oil ports and disrupt global oil trade but also swamp coastal refineries & petrochemical facilities – many of these facilities, as this report shows, will be impacted by just 1m of SLR.”

Staying within 1.5°C is impossible without fossil fuel emission cuts according to the IPCC. So, it’s not just oil but coal must also deliver emission cuts. However, the IEA says coal has already peaked output and emissions but expects oil’s to be still on the rise; possibly only peaking around 2030 and plateauing to 2050. Also, the IEA projects coal emission cuts to be much steeper and faster than oil’s – by 2040, oil will overtake coal to become the No.1 fossil fuel emitter. And by 2050, oil emissions will be greater than coal’s by 1.5GtCO2 – this difference is equivalent to the combined 2022 emissions of Indonesia and the Philippines, the report said.

Investments in clean energy in 2023 were impressive, but fossil fuel’s trump by 1.5x…

…oil takes the lion share at >US$1.07trn dwarfing coal

The oil sector’s sluggish emission cuts are not surprising as trillions of dollars are still flowing into the sector, delaying transition. 2023 supply- and demand-side clean energy investments of over US$1.7trn were impressive, but CWR’s report says that fossil fuel investments and subsidies trump this by 1.5x at a whopping US$2.58trn. Oil takes the lion share – in 2023, oil spending of over US$1.07trn dwarfed coal investments and subsidies of US$184bn.

Asia is especially vulnerable with much of its oil delivered by sea, says the report. Of the world’s Top 5 importers of crude oil which account for 60% of global crude oil imports, four of these are China, India, South Korea & Japan. Of these, CWR found Japan & South Korea to be most at risk, warranting sovereign risk re-ratings. Oil is Japan & South Korea’s largest energy source at 39% and 36% respectively, yet almost 100% is imported by sea, making their energy security very vulnerable to rising seas.

Japan & South Korea most at risk – 9 ports serving 70-100% of national refining cap are hit at 1m of SLR

Tan highlighted that “Japan & South Korea are most at risk – nine ports which serve almost 70-100% of national refining capacity are hit at 1m of SLR. Yet, EV adoption rates are abysmal plus they’re far behind on their Paris climate pledges” Indeed, the report stated that their implementation gaps on Paris Agreement targets lag China’s by at least 7.5x.

“Such laggard actions only fuel fast rising seas which will devastate significant shares of their populations clustered in handfuls of large coastal cities” lamented Tan. Certainly, the report’s analyses indicate no cohesive energy nor economic strategies by these countries to tackle climate risks and transition. “With large shares of their Top 10 Exports skewed towards oil-related sectors, Japan & South Korea must re-think oil or risk a re-rating” urged Tan.

Prioritise SLR assessments, port resilience & oil transition as “port security is energy security”…

…Asia should leverage its prime position to fast track transition

Global temperatures continue to soar. Year-to-date March 2024 has ended up being 1.58°C warmer than the pre-industrial period. At these temperatures, ice is firmly in the danger zone. “Port security is energy security” emphasised Dr Low, “we worry that adaptation plans in place are not sufficient to address fast rising seas. Governments, asset owners, banks, port operators, shipping magnates, energy traders and downstream oil clients must all prioritise SLR assessments, port resilience & oil transition. The outcomes will dictate who survives the impacts.”

The rapid rate of ice loss today means there is no time to waste and the report urges Asia to leverage its prime position as the world’s largest importer & refiner of oil; its global leadership in petrochemical production; and dominance in bunkering, maritime services, ship owning & building to fast track oil transition.

The report details five opportunities where Asia can lead in transition and adaptation, including aggressive expansion of renewables, embracing EVs and introducing caps on ever-growing petrochemical production to stimulate circular economies.

It’s time for Asia to start re-thinking its relationship with oil.

CWR’s report highlights infra risks offering investment opps…

…must wean ourselves off our oil habit or it could sink all our futures

As Tan aptly surmises “Asia is the region most vulnerable to SLR so Asia must 1) spearhead global oil transition; 2) build port resilience; and 3) revolutionise shipping. These are big asks but Asia’s strategic position across the oil chain as well as shipping means it can deliver catalytic & transformative resilience in the energy sector. The infrastructure risks highlighted in our report offer unique investment opportunities.  We must capitalise on them and wean ourselves off oil – far from providing energy security, our oil habit could sink all our futures.”

Ultimately, in writing this report, CWR hopes that the fresh perspectives on oil will inspire and catalyse action from all stakeholders around the world, not just in Asia.