US$2.3TRIL O&G PROJECTS AT RISK IN 2°C SCENARIO

Growing pressure for energy giants as industry shifts towards renewables, says report

THIRTY per cent of investments planned by oil and gas (O&G) majors over the next decade could be wasted if the world economy retools to cap global warming at 2°Celsius, researchers warned on Wednesday.

The 2°C target is the cornerstone of the 196-nation Paris Agreement inked in 2015.

Projects worth US$2.3 trillion (RM9.8 trillion) could become unprofitable as energy shifts towards renewables and if fossil fuel prices stagnate, according to an analysis of investment budgets for 69 publicly-traded oil and gas companies.

Some players will be more exposed than others, said the report entitled “Two degrees of separation: Transition risk for upstream oil and gas in a lowcarbon world”.

Up to 50 per cent of ExxonMobil’s proposed capital expenditure to

2025, for example, is allocated to uneconomical projects likely to disappoint shareholders, the researchers concluded. Shell, Chevron, Total and Eni were found to have put 30 to 40 per cent of future spending at risk, about average for the companies examined.

At the other end of the scale, 14 companies, including stateowned giant Saudi Aramco, were seen as well-aligned with the 2°C scenario.

“This report is a real gamechanger for the future of corporate-investor engagement,” said Nathan Fabian, director of policy and research at PRI, a network of investors who oversee US$62 trillion in assets.

“Investors in O&G companies have been in the dark about their exposure to climate risk — now they will be able to confront companies with precise information.”

PRI produced the report in collaboration with Carbon Tracker, a think tank that assesses the impact of climate change on capital markets and investment.

Major energy companies are already under growing pressure from investors to explain how global warming will affect their bottom lines.

Last month, three-fifths of ExxonMobil shareholders voted for the company to report annually on how new technology and 2°C policies will affect business and investment plans.

Weeks earlier, a majority of Occidental Petroleum shareholders called for similar measures.

“There are clear signs that oil demand could peak in the early 2020s, so companies need to start taking options that would come onstream then off the table,” said James Leaton, Carbon Tracker’s research director. AFP

This report is a real gamechanger for the future of corporate-investor engagement. NATHAN FABIAN Director of policy and research at PRI