Oil majors’ recent project investments are not in line with Paris climate goals, Carbon Tracker think-tank said in a report on Thursday.
The Paris Accord committed to tackling the climate change was signed by 195 nations in December 2015, who have pledged to try and keep the global warming “well below” 2 degrees Celsius above pre-industrial levels. In the B2DS scenario, the energy sector reaches carbon neutrality by 2060 to limit future temperature increases to 1.75°C by 2100.
“Despite increased investor pressure on climate issues, we find that projects are still being sanctioned which don’t fit into a cost-optimized Paris-aligned scenario,” the think-tank said.
The oil and gas projects that have already been sanctioned will take the world past 1.5 degrees, assuming carbon capture and storage remains sub-scale, Carbon Tracker said.
“All of the majors sanctioned such projects last year, including the European majors that are making the greatest moves to reassure investors that they are consistent with the energy transition – Shell, BP, Total and Equinor,” Carbon Tracker said.
The think-tank has found that last year, all of the major oil companies sanctioned projects that fall outside a “well below 2 degrees” budget on cost grounds, adding that these oil firms also hold a number of projects targeting approval this year which don’t make financial sense under a Paris-aligned pathway.
According to Carbon Tracker, no new oil sands projects are economic in a low carbon world, and barely any even if climate targets are missed, and several US shale specialists have portfolios that are entirely out of the budget.
The organization has listed multiple multi-billion projects by oil majors sanctioned in 2018, and to be sanctioned in 2019, as being outside of the 1.7-1.8ºC Sustainable Development Scenario budget.
In the offshore sector, these projects include Chevron’s Gorgon/Jansz stage 2 project in Australia, Fieldwoods Katmai in the U.S., Eni’s Amoca in Mexico, BP’s Ahmeyim FLNG in Mauritania, Total’s Zinia 2 in Angola, Neptune’s Fenja in Norway, North Oil Company’s (Total) Al Shaheen in Qatar, and others.
In the list of 15 largest projects for 2019 sanction – outside of SDS budget – offshore project include, Petrobras’ Jubarte in Brazil, BP’s ACG in Azerbaijan, Petrobras Buzios, Mero 2, Cnooc’s Lufent, Total’s Lapa in Brazil, Alpha Petroleum’s Cheviot in the North Sea, Karoon’s Neon (ex-Echidna) in Brazil and others.
Of all the majors, Carbon Tracker has found that ExxonMobil has the greatest potential capex exposure in low carbon scenarios.
“This particularly relates to Exxon’s tight/shale exposure, of which the over 90% falls outside a B2DS budget – nearly double the proportion of Chevron’s shale acreage,” the think-tank said.
Dramatic shift needed
According to the Carbon Tracker, the shift to a Paris-compliant world will require a dramatic change in behavior from the ingrained growth model.
“Where fossil fuel producers have commented on their climate positioning, they have generally sought to portray themselves as “resilient” – not necessarily expecting a low-carbon outcome, but believing they will be ok if it happens…This leaves open the option of exploring for, developing and selling the fossil fuels that will take the world into dangerous climate territory, provided that it is profitable to do so. ”
For a fossil fuel producer, being “Paris aligned” intuitively suggests committing to refraining from producing projects that would exceed a “well below 2ºC” carbon budget. It is difficult to argue that the company is aligned with Paris if it would contribute to its failure.”
“If companies do not want to commit to aligning investment with climate commitments then that is up to them. However, they cannot claim to be consistent or supportive of Paris in any meaningful way. This may result in challenges to their social license to operate, and ultimately a need to find other investors,” Carbon Tracker said.
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