If you want a safe bet, don’t invest in some of today’s tempting oil and gas projects. That’s the message from a UK-based financial think tank that aims to align the global energy market with climate reality.
The report, by the not-for-profit Carbon Tracker Initiative (CTI), warns that US$91 billion of investors’ money risks going to waste over the next decade because of the industry’s plans.
It highlights a top 20 of the world’s most expensive future oil projects being considered for development, and concludes that, to be profitable, some of them will need oil prices to be far higher than today’s levels.
The findings in the report, CTI says, demonstrate the mismatch between continuing oil demand and reducing carbon emissions to limit global warming.
Economic justification
Since an earlier CTI report in May this year, institutional investors have been asking for more details of the economic justification for projects that require high oil prices.
This latest research ranks oil majors according to their capex (capital expenditure) exposure to undeveloped, high-cost projects, and reveals the projects at highest risk.
The companies, CTI says, need to reduce exposure to exploration projects that must earn the highest prices for their oil, and that this is the principle that should determine investment decisions, rather than the simple pursuit of production volume.
All the fields require at least $95 a barrel to be sanctioned, identified by CTI as the key risk level—the market price required to go ahead with the project, assuming a $15 contingency allowance or “risk premium” on top of the break-even price.
Some projects will need prices above $150 per barrel. The global Brent oil benchmark has ranged between $99 and $114 per barrel over the past 12 months.
Using data from the independent consultants Rystad Energy, CTI finds that BP, ConocoPhillips, ExxonMobil, Chevron, Total, Eni and Royal Dutch Shell are considering investing a total of $357 billion over the next decade on new production in costly and often technically-challenging projects—ranging from Canadian oil sands to deep water finds in the Gulf of Mexico and discoveries in the Arctic.
Both BP and Total have particularly high exposure to deep water and ultra-deep water projects, while ConocoPhillips is heavily exposed to Arctic projects. High carbon-emitting oil sands projects account for 27 percent and 26 percent respectively of Shell’s and Conoco’s potential high-cost development spend.
“This analysis demonstrates the worsening cost environment in the oil industry, and the extent to which producers are chasing volume over value at the expense of returns,” said Andrew Grant, CTI analyst.
Projects shelved
Some majors have started cutting already. For example, in the Canadian oil sands sector so far this year, Total and Suncor have shelved the $11bn Joslyn mine project, and Royal Dutch Shell has put on hold its Pierre River project.
With deep-water projects, BP has delayed/cancelled its Mad Dog extension in the Gulf of Mexico, and Chevron is reviewing its $10bn Rosebank project in the North Sea.
In the Arctic, Statoil and Eni have deferred a decision on the $15.5bn Johan Castberg project.
The CTI report says projects that depend on sustained high prices for a return are at risk from a future double hit of falling oil prices and growing climate regulation in an increasingly carbon-constrained world.
Its study in May this year showed that oil prices have twice fallen as low as $40 per barrel in the last decade.
The U.S. Energy Information Administration recently reported that the oil and gas sector has increased borrowing heavily to cover spending and dividends.
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Here are three new films to watch this Earth Week that will transport you from pole to pole and introduce you to the scientists and activists working to save our shared home.
1. The Year Earth Changed
Where to Watch: Apple TV+
When to Watch: From April 16
The coronavirus pandemic has brought home the stakes of humanity's impact on the environment. But the lockdowns also proved how quickly nature can recover when humans give it the space. Birds sang in empty cities, whales surfaced in Glacier Bay and capybara roamed the South American suburbs.
The Year Earth Changed captures this unique year with footage from more than 30 lockdowned cities between May 2020 to January 2021. Narrated by renowned wildlife broadcaster David Attenborough, the film explores what positive lessons we can take from the experience of a quieter, less trafficked world.
"What the film shows is that the natural world can bounce back remarkably quickly when we take a step back and reduce our impact as we did during lockdown," executive producer Alice Keens-Soper of BBC Studios Natural History Unit told EcoWatch. "If we are willing to make even small changes to our habits, the natural world can flourish. We need to learn how to co-exist with nature and understand that we are not separate from it- for example if we closed some of our beaches at for a few weeks during the turtle breeding we see that it can make a huge difference to their success. There are many ways that we can adapt our behavior to allow the natural world to thrive as it did in lockdown."
2. After Antarctica
Where to Watch: San Francisco International Film Festival
When to Watch: 12 a.m. PST April 9 to 11:59 p.m. April 18
In 1989, Will Steger led an international team of six scientists and explorers to be the first humans to cross Antarctica by dogsled. Steger and his team weren't just in it for the adventure. They also wanted to draw attention to the ways in which the climate crisis was already transforming the icy continent and to rally support for the renewal of the Antarctic Treaty, which would keep the continent safe from extractive industries.
In After Antarctica, award-winning filmmaker Tasha Van Zandt follows Steger 30 years later as he travels the Arctic this time, reflecting on his original journey and once again bringing awareness to changes in a polar landscape. The film intersperses this contemporary journey with footage from the original expedition, some of which has never been seen before.
"Will's life journey as an explorer and climate activist has led him not only to see more of the polar world than anyone else alive today, but to being an eyewitness to the changes occurring across both poles," Van Zandt told EcoWatch. "But now, these changes are happening in all of our own backyards and we have all become eyewitnesses. Through my journey with Will, I have learned that although we cannot always control change, we can change our response. I feel strongly that this is a message that resonates when we look at the current state of the world, as we each have power and control over how we choose to respond to hardships, and we all have the power to unite with others through collective action around a common goal."
After Antarctica is available to stream once you purchase a ticket to the San Francisco International Film Festival. If you miss it this weekend, it will screen again at the Minneapolis St. Paul International Film Festival from May 13 to May 23.
Tasha Van Zandt
3. The Race to Save the World
Where to Watch: Virtual Cinema
When to Watch: From Earth Day, April 22
While many films about the climate crisis seek to raise awareness about the extent of the problem, The Race to Save the World focuses on the people who are trying to stop it. The film tells the story of climate activists ranging from 15-year-old Aji to 72-year-old Miriam who are working to create a sustainable future. It follows them from the streets to the courtroom to their homes, and explores the impact of their advocacy on their personal lives and relationships.
Emmy award-winning documentary filmmaker Joe Gantz told EcoWatch that he wanted to make a film about climate change, but did not want to depress viewers with overwhelming statistics. Instead, he chose to inspire them by sharing the stories of people trying to make a difference.
"Unless millions of people take to the streets and make their voices heard for a livable future, the politicians are not going to get on board to help make the changes needed for a sustainable future," Gantz told Ecowatch. "I think that The Race To Save The World will energize and inspire people to take action so that future generations, as well as the plants, animals and ecosystems, can survive and thrive on this planet."
Check back with EcoWatch on the morning of Earth Day for a special preview of this inspiring film!