Carbon Tracker stress test shows oilsands a bad bet for global energy companies

CALGARY – A new study by the Carbon Tracker Initiative shows the world’s biggest oil and gas companies can still make big profits in a carbon constrained world if they avoid high cost, high carbon projects like the oilsands.

The London-based organization did an independent stress test on how energy projects would be affected by the demand drop needed to keep global temperatures from rising more than two degrees Celsius, and compared that with a business as usual case.

The study released late Wednesday shows companies including ExxonMobil, Shell, BP, Chevron, ConocoPhillips, Eni and Total would actually be worth more if they were to focus only on the lower cost projects needed in a world where demand averages around 88 million barrels a day between now and 2035.

The takeaway, according to co-author Mark Fulton, is that it doesn’t make sense for these global energy companies to be investing in deep offshore projects or those in the oilsands.

“The idea is really as simple as don’t touch high cost, high carbon. You don’t need it, and if you do it and you get it wrong it’s going to cost you a lot of money,” said Fulton.

He said the stress test showed those capital intensive projects like the oilsands only start to make sense if oil goes above $120 a barrel and stays there for some time.

“Unless you really believe the oil price is going to shoot back up and stay there, then what we’re saying is a more prudent approach would be to stay off the high cost projects,” Fulton said.

This is a big challenge for pure oilsands producers without lower cost, less carbon-intensive projects to choose from, he said.

“We’ve always said the Canadian oilsands are one of the big carbon bombs that is unneeded,” said Fulton. “If you’re exposed to that then in our view, what can we say other than that’s not going to be a good thing to be exposed to.”

Fulton said Carbon Tracker expects oil demand to drop as fuel efficiency and electric car use increase and more stringent carbon policies are adopted.