Report: Majors Continue to Invest in Climate-Threatening Projects

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Published Sep 9, 2019 7:45 PM by The Maritime Executive

The not-for-profit think-tank Carbon Tracker has released a report analyzing the degree to which oil and gas companies are continuing to invest in climate-threatening projects. The report finds that $50 billion worth of approved projects in the last year are incompatible with global climate goals. 

The study says that no major oil company is investing to support the goals of keeping global warming well below 2?C and to pursue efforts to limit it to a maximum of 1.5?C. It warns that fossil fuel demand will have to fall to meet international climate targets, and only the lowest cost projects will deliver an economic return under these goals. 

The report highlights 18 projects worth $50 billion that have recently been sanctioned that will be “deep out of the money in a low-carbon world.” They include:

• Shell’s $13 billion LNG project in Canada.
• BP, Chevron, ExxonMobil and Equinor’s $4.3 billion ACG deepwater oil project in Azerbaijan.
• BP, ExxonMobil, Total and Equinor’s $1.3 billion Zinia 2 deepwater oil project in Angola.

Investment decisions on a further $21 billion in 12 projects inconsistent with a low-carbon world are due this year. Andrew Grant, Senior Analyst at Carbon Tracker and report author, says investors are seeking to drive change in the companies they own through initiatives such as Climate Action 100+ backed by investors with assets worth $34 trillion.

Carbon Tracker applied the IEA’s most ambitious low emissions pathway – the Beyond 2 Degrees Scenario [1.6 deg], and estimates that the world’s largest listed oil and gas companies ExxonMobil, Chevron, Shell, BP, Total, Eni and ConocoPhillips with Equinor, each spent at least 30 percent of their investment in 2018 on projects that are inconsistent with a 1.6?C world. The report asserts projects already sanctioned by the oil and gas industry will take the world beyond a 1.5?C warming pathway.

Meeting the IEA’s 1.6?C scenario will require companies to slash investment, even with significant Carbon Capture and Storage technology, which at present looks very unlikely to be realized, says Carbon Tracker. Demand for oil can be satisfied with projects that break even at below $40 per barrel and pursuing higher-cost projects risks creating stranded assets that will never deliver adequate returns.

Carbon Tracker states that of all the oil majors ExxonMobil has the greatest risk of stranded assets in a low-carbon world, with more than 90 percent of potential 2019-2030 spending on new projects outside a 1.6?C  pathway. It is followed by Shell (70 percent), Total (67 percent), Chevron (60 percent), BP (57 percent) and Eni (55 percent).

Danielle Fugere, president of the not-for-profit As You Sow, said: “All companies that are not Paris-aligned, and are not making plans to become Paris-aligned, are a direct threat to investor portfolios. Not only are these companies at risk of value destruction as the low-carbon energy transition moves forward without them, but they are creating significant risk to companies across the economy.”