Big Oil Might Bet $50B On Potentially Non-Viable Projects: Report

Big Oil companies are betting $50 billion on oil and gas projects that would be unviable in a low-carbon world, Carbon Tracker has warned, noting that the approval of these projects suggests the industry is still firmly on a path that diverges from the Paris Agreement goals.

In a report titled “Breaking the Habit – Why none of the large oil companies are ‘Paris-aligned’, and what they need to do to get there”, the climate change think-tank lists several oil and gas projects as examples of Big Oil’s divergent investment strategy for the future. These include the $13-billion LNG Canada project, the $3.6-billion expansion of the Gorgon LNG project, Exxon’s Aspen oil sands project, which will cost $2.6 billion, and the $1.3-billion Zinia 2 deepewater project led by BP, Exxon, Total, and Equinor.

Carbon Tracker says a Paris-compliant world would need a lot less oil and gas, which would make a lot of these projects unviable in such a world. Under a scenario where global warming is arrested at 1.6 degrees Celsius, the energy industry would need an 83-percent lower capex, the think-tank says. Under a 1.7-1.8 degrees scenario, oil and gas capex would be 60 percent lower.

Yet, according to the report, Big Oil is not preparing for a Paris-compliant world, judging by the recent project approvals. While Carbon Tracker is critical of this fact, it seems to be the realistic scenario as some begin to question the chances of the Paris Agreement goals.

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A recent study, for example, warned China’s Belt and Road initiative alone could compromise the success of the Paris Agreement. The initiative, the Tsinghua Center for Finance and Development says in the study, involves 126 countries, excluding China. These countries together account for 28 percent of emissions from human activity.

"We have a business-as-usual scenario that says if you continue the way you are then even if every other country on the planet -- which includes US, Europe, China and India -- goes on a 2C pathway, this is still going to blow the carbon budget," says Simon Zadek, a fellow at the Tsinghua Center.

By Irina Slav for Oilprice.com

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