Fossil Fuel Giants at Risk from Over-production

The business strategies of major oil and gas firms remain at odds with the goals of the Paris Agreement, think tank Carbon Tracker has said, with most planning on production increases. Of the top 25 firms listed in a new report, only three plan for flat production volumes in the near term, with only UK-based BP targeting a decline. The study used a new scorecard to assess alignment with Paris climate goals based on five criteria: investment options, recent project sanctions, production plans, emission targets and executive remuneration. While BP was awarded a ‘D’ grade, several US-based and national oil firms were handed ‘G’ score – including Exxon Mobil, Petrobras and Saudi Aramco. US-based ConocoPhillips was the only company to be given an ‘H’, indicating alignment with a 2.4°C temperature rise – partly due to the firm targeting a 47% increase in production by 2030. The report also highlighted several sanctioned or proposed projects that would take production above levels consistent with limiting climate change to 1.5°C, including Equinor and BP’s US$2.4 billion Munin project in Norway, and TotalEnergies’ US$1.8 billion Jobi-Rii project in Uganda – also supported by the China National Offshore Oil Corporation. Carbon Tracker warned that firms planning on strong production increases were most likely to be putting their financial prospects at risk, recommending that declining demand and price levels be factored into strategic decision-making. “Near-term over-investment could have a significant impact on a company’s future cash flow generation,” the think tank said. “Producers with lower-cost portfolios who adequately prepare for declining demand will likely be more financially resilient, should prices fall in the future.”

 

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