The world's largest oil and gas companies often report a range of internal and proprietary climate scenarios, making it difficult to compare across the sector, non-profit think tank Carbon Tracker said in a report, calling for a common reference scenario and financial risk disclosures just as some of the oil majors are holding their annual shareholders' meetings.
Carbon Tracker's report analyzed the climate risk company disclosures of BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Shell, Statoil (now Equinor), and Total. The analysis compared the climate reports of the oil majors according to four key themes-the 2°C scenario modeling, scenario outputs, market risk, and carbon pricing.
The main findings in Carbon Tracker's analysis include clear inconsistencies in the current use of scenario analysis, as companies take different approaches to different scenarios, and this impedes comparability. Then, although some companies model the possibility that lower commodity prices are possible with lower demand for oil and gas in the future, others have skipped this process, instead measuring their resilience against the price assumptions of third-party scenarios, the Carbon Tracker report says.
"Despite these challenges, integrated oil companies aren't planning on 2°C any time soon, yet claim they can manage it nonetheless. Most companies agree that lower oil and gas demand would in turn lead to lower commodity prices, but there is little discussion about how much lower they anticipate prices falling," Carbon Tracker said.
"Little quantification of financial risk flowing from the scenario analysis is provided. Key details are omitted from scenario and stranded asset risk analysis, including the financial impacts of sustained high carbon prices and oil demand destruction resulting from the rapid advancement of renewables and EVs," the think tank said.
Just last week, large global investors-representing a combined US$10.4 trillion worth of assets under management-urged oil and gas companies to start acting responsibly in tackling climate change, putting pressure on Big Oil ahead of several upcoming annual general meetings.
"Investors are embracing their responsibility for supporting the Paris agreement. It is time for the entire oil and gas industry to do the same," sixty large investors wrote in an open letter to the Financial Times on Friday.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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