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The 'stranded assets risk' debate in the oil sector

The "stranded assets" debate in the oil sector. What's going on? Fossil fuel demand is likely to decrease and many potential projects are at risk of destroying shareholder value. Over the coming decades we will continue to consume fossil fuels: production will go on and existing fossil fuel reserves will not be "stranded." What Oil Companies Investors can do What CTI and ETA say say What demand growth "Growth of population and national income will boost energy demand." "Even ignoring the possibility of new climate policies oil demand is likely to decline through 2050." E) total energy demand modest growth decline M fossil fuel share, according to Exxon M fossil fuel share, according to Shell Slow growth in Asian emerging economies Rapid increases in transport efficiency Electric vehicle deployment 3/4 2/3 Local air pollution control Curtailment of oil consumption subsidies Substitution toward natural gas and solar х dlimate policy .... "Governments won't act on climate change within any time frame relevant to corporate decision-making." "Climate policy is not binary: regional, national and sector-level policies are also setting in." 2007 2012 2050 The 2°C Scenario implies reductions in fossil fuel use of a scale and at a speed considered unrealistic. global 45% 67% 2100 E.g. Shell New Lens scenarios: the world can tackle the climate issue over the course of this century, not less. GHG emissions Share subject to national legislation or emission-reduction strategies E.g. In June 2014, the US EPA and China proposed major CO2 pollution reduction regulations. New space for Investors Engagement ши Breakeven oil price (BEOP) as a key indicator of potential project competitiveness. $95/bbl Brent Companies should disclose it to allow investors assess the risk. The potential capex (2014-25) on new high-cost projects (above $95/bbl Brent) is the most exposed to low return risk. Carbon Supply Cost Curve The curve tells investors which potential projects are at risk of destroying shareholder value. (Tl and ETA welcome this debote as a sign of progress in the fossil fuel industry. Sources: CTI/ETA report 'Responding to Shell, an analytical perspective', July 2014: Exxon report 'Energy and Carbon. Managing the risks', April 2014 Shell letter on Carbon bubble and stranded assets', May 2014 Data are approximated. Carbon Tracker © Carbon Tracker 2014 Designer: Margherita Gagliardi Some oil companies, liko Shell and Exxon roloasod position statements on the issue by 2040 Energy Transifion Advisors (FTA Carbon Trader hnitiative (aI) UMop- Mos puDuap D jo sJoua

The 'stranded assets risk' debate in the oil sector

shared by margheritagagliardi on Aug 03
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This infographic shows how the debate with the fossil fuel companies on the 'stranded assets risk' issue is taking shape. The Carbon Tracker Initiative (CTI) is investigating on the possibility of fin...

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