Shell had already lowered its long-term outlook at the end of last year. As a result, BP said, it would need to cut the value of its assets by between $13 billion and $17.5 billion, and that it may never develop some of its prospective projects. ExxonMobil, for example, maintains that its oil and gas reserves face little risk of being stranded.īP said in mid-June that it expects governments will accelerate a transition to low-carbon energy in the aftermath of the coronavirus pandemic, and that the two forces together had compelled the company to revise its long-term outlook for oil and gas demand. That acknowledgment, that the risk is real and it’s here in the present, is a really big deal.”Ī growing list of major investors and advocacy groups have been pressing oil companies to better disclose and confront the risk that some of their fossil fuel investments may never be developed or may lose substantial value as the world pivots towards a cleaner energy system in order to reduce greenhouse gas emissions. “This is a huge turnaround from the industry’s previous stance, which had been that no existing assets were likely to be stranded, that there may be risks in the future, but not in the here and now. “I think we may look back on this as the turning point, the moment the industry finally started to say that real assets with real dollar figures associated with them are likely to be ‘stranded’”-or left undeveloped-“in a decarbonizing world,” said Andrew Logan, senior director of oil and gas at Ceres, a sustainable business advocacy group that has represented major investors in their engagement with oil companies. Some analysts say the global oil and gas industry is undergoing a fundamental transformation and is finally being forced to reckon with a future of dwindling demand for its products. Both companies said the accounting moves were a response not only to the coronavirus-driven recession, but also to global efforts to tackle climate change. The announcement came two weeks after a similar declaration by BP, saying it would reduce the value of its assets by up to $17.5 billion. This week, Royal Dutch Shell said it would slash the value of its oil and gas assets by up to $22 billion amid a crash in oil prices. Shell also said it intended to set a stricter target to reduce the net carbon footprint of its energy products by 30% by 2030, from 20% currently, and aim for a cut of 65% by 2050, from 50% at present.Two of the world’s largest energy companies have sent their strongest signals yet that the coronavirus pandemic may accelerate a global transition away from oil, and that billions of dollars invested in fossil fuel assets could go to waste. BP made a similar announcement in February. ![]() The Anglo-Dutch company told investors in April that it intended to stop adding greenhouse gases to the atmosphere by 2050. “While neither Shell nor BP will be going anywhere soon, their importance as dividend payers will likely diminish relative to other sectors, and yield-hungry investors need to be prepared for this eventuality.'' ![]() “In a world of falling oil demand and a bigger push towards renewables, these energy titans increasingly look like creatures from another era, something which should give investors pause for thought,'' said Chris Beauchamp, chief market analyst at IG. ![]() Shares in the company dropped 2.5% on the news. On Tuesday, it was trading near $41 a barrel. Shell predicted prices for Brent crude, the international oil benchmark, would be at $50 dollars a barrel in 2022, having earlier predicted a price of $60 a barrel. price of oil went below zero in April for the first time ever. With storage facilities filling up, the U.S. Supply of oil and gas was particularly high when the outbreak began, creating a perfect storm for the industry. ![]() There is little need in aviation for fuel, for example, since most planes are grounded. The pandemic has hit the wider energy industry hard because it has placed onerous limits on business, travel and public life.
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