Friday, August 15, 2014

Top 20 Oil Projects Put Investors’ Billions at Risk

An oil extraction platform in the North Sea, off the coast of Norway. (Credit: Håkon Thingstad via Wikimedia Commons) Click to enlarge.
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 thinktank 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.

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.

Top 20 Risky Projects (Credit: www.carbontracker.org) Click to enlarge.
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.

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.

Top 20 Oil Projects Put Investors’ Billions at Risk

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