Mirror mirror on the wall, who’s the greenest of them all? Well, it’s not Suncor, ExxonMobil or Chevron, according CDP (the Carbon Disclosure Project).
The three North America based firms came bottom of the CDP’s oil and gas League Table, which ranks 11 of the largest (by market capitalization) and highest-impact publicly-listed oil and gas companies.
Europe’s Statoil, Eni and Total, meanwhile, come out smelling of roses, as much as oil and gas firms can smell of roses, taking first, second and third places respectively in CDP’s league table, partly due to a higher proportion of gas and less risky oil sand resources in their portfolios.
Across all 11 firms, of the US$160 billion expected to be spent in 2016, just 1.5% is anticipated to be on low-carbon energy growth, which could mean these firms miss out on low-carbon energy growth in coming decades, warns CDP.
CDP’s league table aims to measure firms against a set of what it believes are key metrics that could have a material impact on company earnings and therefore investment decisions, as the world transitions to a low carbon economy.
Its focus on the oil and gas sector follows the Paris Agreement coming into force, as of 4 November 2016, and the Task Force on Climate related Financial Disclosure (TCFD) due to publish its Phase II report in December 2016.
"There is now increasing pressure on oil and gas companies to show portfolio resilience and adapt existing business models to align with a transition to a low-carbon economy, which, analysis demonstrates, will require a significant reduction in the overall use of fossil fuels,” says CDP.
“Current [oil firm] business models continue to rely heavily on finding and proving oil reserves. This resource ownership focus is unsustainable and will need to adapt for a low-carbon transition,” warns the report. This is based on an assumption that peak oil demand is expected to occurring within the coming decade, something which major oil firms might dispute.
While the likes of BP, for example, expects renewables to growth significantly in coming decades, rising demand for energy, include for transport, will mean global liquids demand (including oil, biofuels and other liquids) will increase by about 20 MMb/d to reach 112 MMb/d by 2025. In its Global Energy Outlook, the firm suggests supply will similarly grow, to meet demand, by 19 MMb/d by 2035.
What’s not as much in dispute is that the industry is a source of emissions. According to the CDP report: “The oil and gas industry is amongst the most emissions intensive and, when the emissions impact of its products are considered, collectively accounts for approximately half of global carbon dioxide (CO2) emissions, with about 90% of these emissions coming in the downstream use of hydrocarbons (Scope 3 emissions). The industry is also a significant source of methane emissions, a greenhouse gas with a global warming potential significantly higher than that of CO2.”
The firms were assessed by CDP against areas: fossil fuel asset mix, capital flexibility, climate governance and strategy, emissions and resource management and water resilience.
Three who would otherwise be listed in the table didn’t respond to CDP, so didn’t get ranked: Saudi Aramco, Rosneft and PetroChina.
Statoil ranked number 1, followed by Eni, Total, Shell (including BG Group), BP, Occidental, Petrobras, ConocoPhillips, Chevron, ExxonMobil (with the highest market capitalization among the group) and Suncor.
Statoil’s ranking is helped by it having the highest percentage of gas reserves, and a recent increase in gas production. It’s also a lower reserve life, which means it potentially has more flexibility to adapt its capital strategy, says CDP. Statoil also has the lowest upstream emissions intensity and manages its methane and flaring emissions better than its peers, says the report. The firm is also investing in offshore wind.
Eni’s focus on gas has also increase of late, with its major finds offshore Egypt, notably Zohr, set to boost its gas production. The firm is also planning Euro1 billion investment in renewables over the next three years, mostly relating to solar projects.
Total, meanwhile, has an ambition for “20% low-carbon assets in 20 years.” It recently acquired Sunpower, a solar panel producer, and Saft, a battery manufacturer and it is expected to be producing 50% gas by 2035.
All three highlight a trend in the results; European firms are more active in the low-carbon space, while US firms, such as Chevron and Occidental, “tend to shy away from joint public statements supporting climate policy and legislation,” says CDP.
More broadly, most firms face issues such as operational efficiency, with some 6% of natural gas production lost on average through flaring, methane venting and leakages. While gas is touted as a cleaner fuel than coal or oil, “the lifecycle carbon emissions gains of natural gas over coal in electricity generation are eroded as a result of methane leakage during extraction and transportation to end use,” says CDP.
Becoming more efficient could be a win-win for the industry.
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