Still, for some investors selling the high-carbon projects makes the companies more resilient to future climate legislation, and that’s a step in the right direction.
If companies can use the funds from the sale of carbon intensive projects to develop lower-intensity production, that’s a “decision that we are generally supportive of,” said Nick Stansbury, head of commodity research at Legal & General Investment Management, one of the largest shareholders of major oil companies.
Big Challenge
Oil executives say their big challenge is to cut emissions while continuing to supply energy to a growing global economy. Shutting down production can create shortages that could boost prices, reduce affordability and even encourage the start up of new projects.
To tackle the “radical changes” required to keep global warming at a safe level, demand for low-carbon energy would have to rise dramatically, said Tal Lomnitzer, a senior investment manager at Janus Henderson Investors. It would have to be aided by government policy changes and involve social pressure, he said.
“A much faster transition is technically possible but actors need guidance,” Lomnitzer said. “It’s likely to arrive from the populace and then be expressed via bans, taxes and incentives.”
The oil companies support a tax on carbon as a way to discourage emissions, and are promoting natural gas as a cleaner fuel. France’s Total applies a carbon price internally in its assessment of projects, a spokeswoman said, as do others like BP. Qatar, the world’s biggest liquefied natural gas exporter, started a carbon capture and storage project as part of an effort to address concerns about climate change, Energy Minister Saad Sherida Al-Kaabi said Tuesday.
Investor pressure is also forcing the oil majors to increase spending on green energy. They’re building wind and solar projects, boosting electric-vehicle infrastructure and reducing the amount of gas they release into the atmosphere. But these investments are still a fraction of overall expenditure.
“The transition from Big Oil to Big Energy will certainly take time,” said Rob Barnett, an energy policy analyst at Bloomberg Intelligence. “But we do see things headed in that direction.”
This article provided by Bloomberg News.