Big Oil undermines UN climate goals with $50bn of new projects: report

Report found that 18 newly approved oil and gas projects worth $50 billion could be left “deep out of the money” in a lower carbon world. (Reuters)
Updated 07 September 2019

Big Oil undermines UN climate goals with $50bn of new projects: report

  • Carbon Tracker says 18 new projects “deep out of the money”
  • Companies risk “wasting” $2.2 trillion by 2030

LONDON: Major oil companies have approved $50 billion of projects since last year that will not be economically viable if governments implement the Paris Agreement on climate change, think-tank Carbon Tracker said in a report published on Friday.
The analysis found that investment plans by Royal Dutch Shell, BP and ExxonMobil among other companies will not be compatible with the 2015 Paris Agreement, which aims to limit global warming to 1.5 degrees Celsius.
“Every oil major is betting heavily against a 1.5 degree Celsius world and investing in projects that are contrary to the Paris goals,” said report co-author Andrew Grant, a former natural resources analyst at Barclays.
Big oil and gas companies have welcomed the UN-backed Paris Agreement, in which governments agreed to curb greenhouse gas emissions enough to limit global warming to 1.5 degrees Celsius, or “well below” 2 degrees Celsius by the end of the century.
Scientists view 1.5 degrees Celsius as a tipping point where climate impacts such as sea-level rise, natural disasters, forced migration, failed harvests and deadly heatwaves will rapidly start to intensify if it is breached.
Carbon Tracker’s analysis, co-authored by Mike Coffin, a former geologist at BP, found that 18 newly approved oil and gas projects worth $50 billion could be left “deep out of the money” in a lower carbon world.
The projects include Shell’s $13 billion liquefied natural gas (LNG) Canada LNG project, a $4.3 billion oilfield expansion project in Azerbaijan owned by BP, Exxon, Chevron and Equinor, and a $1.3 billion deepwater project in Angola operated by BP, Exxon, Chevron, Total and Equinor.
The report also concluded that oil and gas companies risk “wasting” $2.2 trillion by 2030 on new projects if governments apply stricter curbs on greenhouse gas emissions.
Previous reports on the implications of climate change for oil and gas companies by Carbon Tracker and other researchers have contributed to a wave of investor pressure on majors to show that their investments are aligned with the Paris goals.
While some companies including Shell, BP, Total and Equinor have increased spending on renewable energy and introduced carbon reduction targets, the sector says it needs to continue investing in new projects to meet future demand for oil and gas as Asian economies expand.
Shell said in a statement that it has set out an “ambition” to halve net carbon emissions by 2050 “in step with society as it moves toward meeting the aims of Paris.”
“As the energy system evolves, so is our business, to provide the mix of products that our customers need,” Shell said.
BP said its strategy to produce low cost and low carbon oil and gas was in line with the International Energy Agency (IEA)forecasts and the Paris agreement.
“All of this is aimed at evolving BP from an oil and gas focused company to a much broader energy company so that we are best equipped to help the world get to net zero while meeting rising energy demand,” the company said in a statement.
Exxon, Chevron, Equinor and Total did not reply to requests for comment.
Nevertheless, the latest Carbon Tracker report said the big oil and gas companies spent at least 30% of their investment last year on projects that are inconsistent with the path to limit global warming to even 1.6 degrees Celsius.
“These projects represent an imminent challenge for investors and companies looking to align with climate goals,” the report warned.
Carbon Tracker’s calculations were based on three scenarios produced by the Paris-based IEA models of oil and gas supply under different warming pathways.
With fossil fuel supply on course to outstrip demand if the world is to limit warming at 1.5 degrees Celsius, the report assumed that the projects with the lowest production costs would be the most competitive.
“Demand for oil can be satisfied with projects that break even at below $40 per barrel and pursuing higher-cost projects risks creating stranded assets that will never deliver adequate returns,” the report said.
Benchmark crude futures were trading at around $62 per barrel on Thursday.


Blame game as wheels come off India’s auto sector

Updated 16 min 48 sec ago

Blame game as wheels come off India’s auto sector

NEW DELHI: When India’s Finance Minister Nirmala Sitharaman claimed that a preference by millennials for ride-hailing apps was contributing to a painful slump in car sales, it sparked an online backlash from furious youngsters.

They started a campaign using ironic hashtags such as #BoycottMillennials and #SayItLikeNirmalaTai last week to push back against older generations blaming them for today’s problems in society.

While data shows firms such as Uber and Ola are popular with younger consumers more comfortable with shared mobility and digital trends, analysts say the auto industry’s problems run deeper than that — and it is facing more serious bumps in the road.

With a population of 1.3 billion people, India is the world’s fourth-largest car market and one where owning a vehicle is as much a status symbol as a means of transport.

But the country’s once-booming auto sector — seen as an important barometer of overall economic health — is in the slow lane, with sales slumping for the 10th-straight month in August.

“The minimum (priced) car that you can get nowadays starts from six to seven lakhs ($8,500 — $9,800),” university student Somya Saluja told AFP.

“So it’s much easier to pool-in rather than to buy a new car.”

Even India’s richest banker, Uday Kotak, recently said that his son was more comfortable using ride-sharing apps than owning a car.

Uber and Ola reportedly facilitate some 3.65 million daily rides.

Still, Avanteum Advisers managing partner VG Ramakrishnan told AFP the key reason for the drop in car purchases was economic.

“I think the slowdown is primarily because consumer confidence is low and income growth has really been impacted in the last couple of years,” he told AFP.

India’s economic growth slowed for the fifth-straight quarter in April-June to reach its weakest pace in five years.

Banks are also more reluctant to lend owing to a liquidity crunch caused by the near-collapse a year ago of IL&FS, one of India’s biggest shadow banks — finance houses responsible for significant consumer lending.

There are also extra production costs caused by new rules requiring cars to be compliant with emissions and safety standards, while a 28 percent goods and services tax (GST) introduced in 2017 has dampened demand, analysts said.

“Cars are increasingly becoming unaffordable now because of so many taxes,” Karvy Stock Broking auto analyst Mahesh Bendre told AFP.

“To put things in perspective, if you buy a car in India, at least 40-45 percent of costs go to the government in terms of taxes and registration charges and so on.”

A year ago, India displaced Germany to become the world’s fourth biggest car market, having clocked up annual sales growth above seven percent for several years.

But the promising growth ride is screeching to a halt, with passenger car sales tumbling this year, including a 41 percent drop last month — the worst since records began more than 20 years ago.

Aside from passenger cars, sales of commercial vehicles, motorcycles and scooters have also been hammered.

With the industry — a major employer in India — contributing more than seven percent to total GDP and almost half of manufacturing GDP, the potential fallout from an extended slowdown is sending shockwaves through the economy.

Manufacturers are reducing production and cutting jobs, which is also affecting related industries such as auto component manufacturing and at dealerships, totaling about seven percent of India’s total workforce, Bendre said.