Paris Agreement put firms under pressure to cut production by 35%
06 November 2019 |
3:07 am
Big oil companies need to reduce their oil production by 35 per cent by 2040,r to preserve shareholder value in a changing world, think-tank Carbon Tracker has warned.
Big oil companies need to reduce their oil production by 35 per cent by 2040, to preserve shareholder value in a changing world, think-tank Carbon Tracker has warned.
The changing world involves sticking to the Paris Agreement targets of keeping the rise of average global temperatures to below 2 degrees Celsius. To do that, big oil firms need to seriously reduce the amount of carbon dioxide that it releases as it pumps oil and gas out of the ground.
Exxon, for instance, needs to reduce its annual emissions from close to an estimated 600 million tonnes this year, to about 450 million tonnes by 2040, Carbon Tracker says.
For Shell, the reduction needs to be from over 500 million tonnes to below that number in the next 20 years. The average emission reduction percentage across the big oil group is 40 per cent, the think-tank estimated.
These reductions, however, are calculated on the basis of what Carbon Tracker calls company carbon budgets. Yet these are not the companies’ actual budgets.
In September, Carbon Tracker again sounded an alarm on Big Oil, saying the super majors were betting $50 billion on oil and gas projects that would be unviable in a low-carbon world.
That 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 think-tank said Big Oil was not preparing for that low-carbon world, and this could cost it dearly.
Under a scenario where global warming is arrested at 1.6 degrees Celsius, the energy industry would need an 83-percent lower capex, Carbon Tracker said under a 1.7-1.8 degrees scenario, oil and gas capital expenditure (capex) would need to be 60 per cent lower.
The second report ties things together. Cutting capex is directly related to cutting production of fossil fuels. However, Big Oil might disagree that the world is changing as fast as Carbon Tracker, more than the International Panel on Climate Change would like.
As Shell’s Ben van Beurden notably said in a Reuters interview last month, the world “demands” oil, and until this is the case, the energy industry will continue to invest in the production of that oil.
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