Is Coal A Sinking Ship?
The CTI report " Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures" provides investors and coal companies with a tool – the carbon supply cost curve – which helps identify the projects where the most financial risk lies and direct capital away from them.
Anthony Hobley, CTI CEO speech at UN SG Climate Summit, NYC, 23 september 2014CarbonTracker
Anthony Hobley, Carbon Tracker’s CEO, will officially present CTI’s work at the UN SG Climate Summit, Finance Session on 23rd September 2014 in New York.
Il World Energy Focus, nuovo mensile online della WEC's community, una e-publication gratuita per essere sempre aggiornato sugli sviluppi del settore energetico. Il World Energy Focus contiene news, interviste esclusive e uno spazio dedicato agli eventi promossi dai singoli Comitati Nazionali.
Negative side“Japan should initiate a Pan-PacificInternational Carbon Trading”
by IKENO Shuma
Japan should initiatea Pan-Pacific Carbon Tax
1. On the model, a carbon tax is superior to a carbon trading.
2. A carbon tax can be expected effective.
3. A carbon tax is familiar to many countries.
Background
Background
A model of a single Polluting Firm.B is government revenue.
A model withTwo Polluting Firm.The shadow square is government revenue.
Both a carbon tax and carbon cap-and-trade
will achieve the same level of increased efficiency by achieving the optimal abatement level at the minimum cost.
Japan’s debt against GDPis over 230%.Japan needs tax revenue.And, payment risk is high.
2. A carbon tax can be expected effective.
World carbon dioxide emissions by fossil fuelis 45.4% in 2005
Fossil Fuel Emissions of the world is increasing.
In Japan, coal-fired power generation is increasing.
Fossil fuels are a major cause of global warming.
↓
“China said this week that the country would implement new taxes designed to curb greenhouse gas emissions”
Japan introduced the petroleum coal tax in 2002 .
Japan should initiatea World-Wide Carbon Tax
1. On the model, a carbon tax is superior to a carbon trading.
2. A carbon tax can be expected effective.
3. A carbon tax is familiar to many countries.
Is Coal A Sinking Ship?
The CTI report " Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures" provides investors and coal companies with a tool – the carbon supply cost curve – which helps identify the projects where the most financial risk lies and direct capital away from them.
Anthony Hobley, CTI CEO speech at UN SG Climate Summit, NYC, 23 september 2014CarbonTracker
Anthony Hobley, Carbon Tracker’s CEO, will officially present CTI’s work at the UN SG Climate Summit, Finance Session on 23rd September 2014 in New York.
Il World Energy Focus, nuovo mensile online della WEC's community, una e-publication gratuita per essere sempre aggiornato sugli sviluppi del settore energetico. Il World Energy Focus contiene news, interviste esclusive e uno spazio dedicato agli eventi promossi dai singoli Comitati Nazionali.
Negative side“Japan should initiate a Pan-PacificInternational Carbon Trading”
by IKENO Shuma
Japan should initiatea Pan-Pacific Carbon Tax
1. On the model, a carbon tax is superior to a carbon trading.
2. A carbon tax can be expected effective.
3. A carbon tax is familiar to many countries.
Background
Background
A model of a single Polluting Firm.B is government revenue.
A model withTwo Polluting Firm.The shadow square is government revenue.
Both a carbon tax and carbon cap-and-trade
will achieve the same level of increased efficiency by achieving the optimal abatement level at the minimum cost.
Japan’s debt against GDPis over 230%.Japan needs tax revenue.And, payment risk is high.
2. A carbon tax can be expected effective.
World carbon dioxide emissions by fossil fuelis 45.4% in 2005
Fossil Fuel Emissions of the world is increasing.
In Japan, coal-fired power generation is increasing.
Fossil fuels are a major cause of global warming.
↓
“China said this week that the country would implement new taxes designed to curb greenhouse gas emissions”
Japan introduced the petroleum coal tax in 2002 .
Japan should initiatea World-Wide Carbon Tax
1. On the model, a carbon tax is superior to a carbon trading.
2. A carbon tax can be expected effective.
3. A carbon tax is familiar to many countries.
A history of the solar century so far: a tale of disruption, denial, and exis...Jeremy Leggett
An account of the oil industry's response to climate risk and the emergence of low-cost solar since that late 1990s as seen by a bit-part player in the drama. As presented in the closing keynote at the UBS Renewables and Energy Transition Virtual Conference, 17th September.
The BP Energy Outlook outlines the “most likely” path for the global energy landscape - supply and demand - over the next 20 years. Read the full report here
Own it! Swedish Investments In Global Energy Sector and How Capital Affects C...Stefan Henningsson
Assessment of all Sweden's savings in Mutual Funds, Pension Funds, Insurance Companies, Banks etc and how that impacts climate change today and must be steared towards solutions.
Covid-19 has accelerated the stranding of fossil-fuel-economy assets. What do...Jeremy Leggett
My latest Big Picture update for the team at Solarcentury, built around the latest report from Carbon Tracker, "Decline and Fall", published 4th June.
Apologies for typo in slide 4. Date in bottom caption should read 2023 not 2003.
This year's SITE Energy Day was devoted to discussing the consequences of oil price fluctuations for markets and actors of the economy. The half-day conference engaged policy-oriented scholars and experts from the business community to discuss the impact of oil price fluctuations on macro fundamentals, international trade, strategies of oil cartels, strategic risk management, and opportunities for change in energy systems.
Luca De Lorenzo, Senior Researcher at Stockholm Environment Institute, gave a presentation "Low oil prices and the new climate economy: constraint or opportunity?"
For more information and research analysis please visit: www.hhs.se/site
UAE to abolish fuel subsidies - other oil producers to follow suitAranca
The OPEC’s third-largest oil producer will abolish subsidies and deregulate fuel prices from August 1, 2015 in a move aimed at supporting the national economy, lowering fuel consumption, protecting the environment, and preserving national resources.
A search for hope on the climate front lines in 2020Jeremy Leggett
My presentation at Cambridge University on 5th March. In it I describe an idea for a new people-power company to help lead the charge to a zero-carbon world by decarbonising, recarbonising, and pressuring foot draggers: ZeroCarbon Revolution. A video of the talk can be found at https://climateseries.com/
Microsoft word new base 994 special 02 february 2017 energy newsKhaled Al Awadi
Greetings,
Attached FYI (NewBase 02 February 2017 ) , from Hawk Energy Services Dubai . Daily energy news covering the MENA area and related worldwide energy news. In today’s issue you will find news about:-
Carbon Bubble - Making Sense of a "Fossil Market"Timon Henze
This presentation explores the impact of the so called 'carbon bubble' and how recent developments on the fossil fuel markets will influence financial decision making linked to it. The Dynamics of Oil Prices, CapEx, Cost-Investment-Decisions and Reserves is based with recent analyst data. A second part, obviously, discusses political mitigation proposals (divestment, de-subsidizing and extraction banning) and their rationale.
A history of the solar century so far: a tale of disruption, denial, and exis...Jeremy Leggett
An account of the oil industry's response to climate risk and the emergence of low-cost solar since that late 1990s as seen by a bit-part player in the drama. As presented in the closing keynote at the UBS Renewables and Energy Transition Virtual Conference, 17th September.
The BP Energy Outlook outlines the “most likely” path for the global energy landscape - supply and demand - over the next 20 years. Read the full report here
Own it! Swedish Investments In Global Energy Sector and How Capital Affects C...Stefan Henningsson
Assessment of all Sweden's savings in Mutual Funds, Pension Funds, Insurance Companies, Banks etc and how that impacts climate change today and must be steared towards solutions.
Covid-19 has accelerated the stranding of fossil-fuel-economy assets. What do...Jeremy Leggett
My latest Big Picture update for the team at Solarcentury, built around the latest report from Carbon Tracker, "Decline and Fall", published 4th June.
Apologies for typo in slide 4. Date in bottom caption should read 2023 not 2003.
This year's SITE Energy Day was devoted to discussing the consequences of oil price fluctuations for markets and actors of the economy. The half-day conference engaged policy-oriented scholars and experts from the business community to discuss the impact of oil price fluctuations on macro fundamentals, international trade, strategies of oil cartels, strategic risk management, and opportunities for change in energy systems.
Luca De Lorenzo, Senior Researcher at Stockholm Environment Institute, gave a presentation "Low oil prices and the new climate economy: constraint or opportunity?"
For more information and research analysis please visit: www.hhs.se/site
UAE to abolish fuel subsidies - other oil producers to follow suitAranca
The OPEC’s third-largest oil producer will abolish subsidies and deregulate fuel prices from August 1, 2015 in a move aimed at supporting the national economy, lowering fuel consumption, protecting the environment, and preserving national resources.
A search for hope on the climate front lines in 2020Jeremy Leggett
My presentation at Cambridge University on 5th March. In it I describe an idea for a new people-power company to help lead the charge to a zero-carbon world by decarbonising, recarbonising, and pressuring foot draggers: ZeroCarbon Revolution. A video of the talk can be found at https://climateseries.com/
Microsoft word new base 994 special 02 february 2017 energy newsKhaled Al Awadi
Greetings,
Attached FYI (NewBase 02 February 2017 ) , from Hawk Energy Services Dubai . Daily energy news covering the MENA area and related worldwide energy news. In today’s issue you will find news about:-
Carbon Bubble - Making Sense of a "Fossil Market"Timon Henze
This presentation explores the impact of the so called 'carbon bubble' and how recent developments on the fossil fuel markets will influence financial decision making linked to it. The Dynamics of Oil Prices, CapEx, Cost-Investment-Decisions and Reserves is based with recent analyst data. A second part, obviously, discusses political mitigation proposals (divestment, de-subsidizing and extraction banning) and their rationale.
The legal and moral basis for the Carbon Majors, including Chevron, ExxonMobil, Shell, BP, Gazprom, to pay for the climate damage that their products have caused via a levy into the international loss and damage mechanism.
Episode 66 : Renewable Energy Technologies
Currently, this is the largest source of renewable energy.
However, much of this is low-technology uses in developing countries. Presumably usage of these fuels will fall as countries grow.
Other fuels include things such as ethanol.
Is there enough farmland to grow the needed feedstocks as well as supplying necessary food supply?
Recent concerns over corn prices is an example here
Used for 16% of world electricity production.
Does not require technological breakthroughs.
However, political acceptance is an issue.
Small hydro is cost competitive
Costs of wind fell by a factor of four between 1981-1999
Wind is now competitive in favorable locations.
Now about 5-8 cents/kWh
Competitive with traditional fuels with a $25/ton CO2 tax
Study shows wind is competitive at $38/ton CO2 near Chicago, and could be situated further away with a price of $76/ton CO2.
Distance from center decreases intermittency, but increases transmission losses.
Because wind is intermittent, storage is an issue.
For instance, excess power could be used to compress air in a reservoir as storage.
Currently feasible at about $93/ton
Denmark and Norway work in tandem to provide power.
When winds are favorable, Denmark exports wind energy to Norway. When not, Norway exports hydropower to Denmark.
SAJJAD KHUDHUR ABBAS
Ceo , Founder & Head of SHacademy
Chemical Engineering , Al-Muthanna University, Iraq
Oil & Gas Safety and Health Professional – OSHACADEMY
Trainer of Trainers (TOT) - Canadian Center of Human
Development
This is the first edition of the Deloitte Outlook for oilfield services. The forward-looking report is based on in-depth interviews with 12 executives of oilfield services companies. Its purpose is to obtain companies’ views of their current business environment and where they think the market is heading, both in the short and long term.
DSP World Energy Fund
An Open Ended Fund Of Funds Scheme investing in Energy Companies Globally
This Open-ended Fund of Funds Scheme is suitable for investors who are seeking*:
1. Long-term capital growth
2. Investment in units of overseas funds which invest primarily in equity and equity related securities of companies in the energy and alternative energy sectors
3. High Risk**
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.
**Risk may be represented as:
Low: Investors understand that their principal will be at low risk
Moderately Low: Investors understand that their principal will be at moderately low risk
Moderate: Investors understand that their principal will be at moderate risk
Moderately High: Investors understand that their principal will be at moderately high risk
High: Investors understand that their principal will be at high risk
Webinar: Green Hydrogen and Green Fuels – The Future of EnergyBIS Research Inc.
Visit these related reports for more information on our coverage for Green Hydrogen and Green Fuels.
Samples are available on request or you may also download the Table of Contents.
Green Methanol Market: https://bisresearch.com/industry-report/green-methanol-market.html
Green Hydrogen Market: https://bisresearch.com/industry-report/green-hydrogen-market.html
Green Ammonia Market: https://bisresearch.com/industry-report/green-ammonia-market.html
Carbon Capture Utilization and Storage Market: https://bisresearch.com/industry-report/carbon-capture-utilization-storage-market.html
Misplaced expectations from climate disclosure initiativesNadia Ameli
The financial sector’s response to pressures around climate change has emphasized the role of disclosure, notably through the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures. This Perspective examines two dimensions of the expectations behind transparency and disclosure initiatives: the belief that disinvestment is driven by disclosure; and that investment ‘switches’ from high- to low-carbon assets. We warn about the risk of disappointment from inflated expectations about what transparency can really deliver and suggest some areas that research and public policy should examine to mobilize the required capital to meet climate goals.
The vast majority of Australians are invested in fossil fuels via their superannuation fund. Market Forces maintains the website superswitch.org.au, which profiles over 40 Australian superannuation funds in terms of their fossil fuel investments. Most funds are invested in coal, oil and gas companies, meaning that close to fifteen million Australians have their retirement savings exposed to the fossil fuel sector.
This stands in stark contrast to the 67% of Australians who would choose a superannuation fund which does not invest in fossil fuels over one that does,3 and the 24% who would be willing to switch their super fund based on coal or coal seam gas investments
Similar to Carbon Tracker / Energy Transition Advisors Presentation in Boston & NYC in partnership with Ceres, MSCI and NYSSA - 9/10 July 2014 (20)
Characterization and the Kinetics of drying at the drying oven and with micro...Open Access Research Paper
The objective of this work is to contribute to valorization de Nephelium lappaceum by the characterization of kinetics of drying of seeds of Nephelium lappaceum. The seeds were dehydrated until a constant mass respectively in a drying oven and a microwawe oven. The temperatures and the powers of drying are respectively: 50, 60 and 70°C and 140, 280 and 420 W. The results show that the curves of drying of seeds of Nephelium lappaceum do not present a phase of constant kinetics. The coefficients of diffusion vary between 2.09.10-8 to 2.98. 10-8m-2/s in the interval of 50°C at 70°C and between 4.83×10-07 at 9.04×10-07 m-8/s for the powers going of 140 W with 420 W the relation between Arrhenius and a value of energy of activation of 16.49 kJ. mol-1 expressed the effect of the temperature on effective diffusivity.
Natural farming @ Dr. Siddhartha S. Jena.pptxsidjena70
A brief about organic farming/ Natural farming/ Zero budget natural farming/ Subash Palekar Natural farming which keeps us and environment safe and healthy. Next gen Agricultural practices of chemical free farming.
Artificial Reefs by Kuddle Life Foundation - May 2024punit537210
Situated in Pondicherry, India, Kuddle Life Foundation is a charitable, non-profit and non-governmental organization (NGO) dedicated to improving the living standards of coastal communities and simultaneously placing a strong emphasis on the protection of marine ecosystems.
One of the key areas we work in is Artificial Reefs. This presentation captures our journey so far and our learnings. We hope you get as excited about marine conservation and artificial reefs as we are.
Please visit our website: https://kuddlelife.org
Our Instagram channel:
@kuddlelifefoundation
Our Linkedin Page:
https://www.linkedin.com/company/kuddlelifefoundation/
and write to us if you have any questions:
info@kuddlelife.org
UNDERSTANDING WHAT GREEN WASHING IS!.pdfJulietMogola
Many companies today use green washing to lure the public into thinking they are conserving the environment but in real sense they are doing more harm. There have been such several cases from very big companies here in Kenya and also globally. This ranges from various sectors from manufacturing and goes to consumer products. Educating people on greenwashing will enable people to make better choices based on their analysis and not on what they see on marketing sites.
3. Financial experts making carbon investment risk visible
today in the capital market.
Anthony Hobley - Chief Executive Officer
Mark Campanale - Founder and Executive Director
Jon Grayson - Chief Operating Officer
James Leaton - Research Director
Luke Sussams - Senior Researcher
Reid Capalino - Senior Researcher
Andrew Grant - Financial Analyst
John Wunderlin - Staff Attorney US
Margherita Gagliardi - Communications Officer
Tracy Trainor - Office Manager
Mark Fulton - Founding Partner at Energy Transition
Advisors (ETA); Advisor to Carbon Tracker Initiative
Paul Spedding - Advisor to CTI
Who we are
5. Our formula
...by translating climate science and policy
into the language of finance.
Our work is aimed to align climate risk
with capital market risk...
7. 7
IEA World Energy Outlook
2012
“…..without a significant deployment of
CCS, more than two-thirds of current
proven fossil-fuel reserves cannot be
commercialised in a 2°C world before
2050”
IEA: “Two-Thirds Fossil Fuels
Unburnable
8. A climate fix would ruin investors
I believe humanity is making
risky bets in the climate
casino. I think it is likely that
humanity will continue to make
these risky bets. In that case
ExxonMobil will be proved right.
But it is always possible that
humanity will wake up and make
the needed investments in rapid
change, driven by the magic of
the market and technological
innovation. If that happened,
fossil fuel reserves would indeed
be stranded. Investors beware:
the risk of that cannot be zero.
9. The Risky Business
Which are the potential
Consequences of climate
change
In the US by region and sector?
Michael Bloomberg
Henry Paulson
Tom Steyer
• Large-scale losses of coastal property and infrastructure
• Extreme heat across the nation threatening labor productivity,
human health, and energy systems
• Shifting agricultural patterns and crop yields
10. Obama on Climate
We’re not going to be able to burn it all.
We’re not going to suddenly turn off a switch
and suddenly we’re no longer using fossil fuels,
but we have to use this time wisely…
11. Ceres & CTI / Carbon Asset Risk
Carbon Asset Risk engagement initiative
co-ordinated by CTI and Ceres, with support from the
Global Investor Coalition on Climate Change.
Investors with over $3 trillion in
assets raised these issues with
45 of the largest fossil fuel
companies.
12. Management issues for investors: oil
Denial
> “We will see it coming”
> “It will happen gradually”
Commercial concerns
> Risk of backlash from investors for not pursuing value added investments
> Management have flexibility over capital expenditure
Shareholder message?
> Low return projects tend to be at greater risk from tax, costs and price –
sensitivity scenarios please
> Growth is over-rated
Conclusion?
Be more disciplined on capital investment and return
to shareholders if necessary
13. Carbon Supply Cost Curves: Evaluating Financial Risk
to Oil Capital Expenditures
CTI report is based on a series of technical papers produced
in collaboration with Energy Transition Advisors, research
consultancy led by Mark Fulton, former Head of Research at
Deutsche Bank Climate Change Advisors.
This analysis assists investors to continue their engagement with
companies over carbon asset risk. It introduces the concept of a
carbon supply cost curve to global oil projects .
All reports can be downloaded at www.carbontracker.org
35. Demand matters
• “New policies” to 450: a 20 mb/d difference in 2035.
• Cumulative demand under NPS is 790 bn barrels; 450 is 720 bn barrels, 10% lower.
• But existing base production can produce 460 bn barrels.
• Net new production and hence new capex is over 20% lower
Source: IEA, Redrawing the energy map
IEA oil oil demand scenarios (mb/d)
0
20
40
60
80
100
120
2010 2015 2020 2025 2030 2035
Current NPS 450 Base
36. Cost curve by production type
Source: Rystad Energy and Energy Security Partners
37. “Unburnable carbon”
0%
5%
10%
15%
Shell BP Total Statoil Eni BG
Traditional Deepwater Heavy oil
“Unburnable” carbon (High cost projects) Price effect of $40 fall in oil prices
Source: HSBC Equity Research based on Wood Mackenzie data (2012)
38. Big oil has been a great long term investment
• Helped by supranormal returns – due to OPEC price support?
• But…..
Source: msn.com
39. Performance has been dreadful for 3-5 years
• Undeperformance despite high oil prices. Why? Source: msn.com
41. Capital employed driven by accelerating capex
• Ratio of capex to depreciation at a 10 year high
3000
3100
3200
3300
3400
3500
3600
3700
3800
3900
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014e
Capex/production ($/boe)
Production (000boe/d) RHS
0%
50%
100%
150%
200%
250%
300%
0
5
10
15
20
25
30
35
40
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Capex Clean Depreciation
Ratio (RHS)
Unit capex and production Depreciation and capex ($bn)
42. Swap Capex for DDA
• Capex adjusted earnings would halve, more than doubling its PE
13 15
7
0
5
10
15
20
25
30
35
40
45
50
Stated Clean Capex adjusted
Post tax Tax DDA / Capex
Source: Shell data Source: Zacks Investment Research
Adjusting Shell’s 2013 earnings ($bn) RDSA PE (x)
43. Portfolio opportunities and returns
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
FortHills(w/oupgrader)
Joslyn(w/oupgrader)
QCLNG
PearlGTL
Prelude
IchthysLNG
Block31PSVM
TangguhLNG
YemenLNG
Cardamomdeep
Clov
Qatargas-4
MadDogComplex
ClairRidge
Guara
Jubilee
Source: HSBC Equity Research based on Wood Mackenzie data (2012)
Internal rate of return for different project types (%, post tax: 2012 data)
44. Capital intensity
• High capital intensity means longer payback periods – and often lower returns
0 20 40 60 80 100 120 140
Offshore
Offshore
Tar Sands
Arctic
Mega project
Thousands
Capex per barrel of capacity ($)
Source: Industry reports
45. High cost assets = operational gearing
• A $20 move in oil prices reduces average margins by nearly 25%
• Bitumen margins fall by 50-80%
0 20 40 60 80 100
Exxon realisation (liquids)
Synthetic (Upgraded Bitumen)
Bitumen
Costs
Cash margin
Exxon cash margins (2013, $/boe)
Source: Exxon
46. Shell’s cost curve
• Like most majors, Shell has a wide range of projects with a wide range of break-even costs
• For shareholder returns and to reduce risk, companies should focus on low cost projects
0
20
40
60
80
100
120
140
160
180
200
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Breakevenoilprice($/bbl)
Potential 2014 - 2050 Production (mmbbl)
Below USD/boe 60 USD/boe 60-80 USD/boe 80-100
USD/boe 100-120 USD/boe 120-150 Above USD/boe 150
$80/bbl Breakeven Oil Price
Shell potential future oil production by $/bbl breakeven oil price
Source: Rystad Energy, CTI analysis 2014
47. High cost often equals high carbon
• High carbon issues
– Heavy oil: More energy to produce, more energy to refine
– Tar sands: More energy to produce, more energy to refine, more capital intensive (steel and concrete)
– Arctic: Harsh environment needs more steel and concrete
Rank Name Country Region Category
2014-2025
capex
% of total 2014-
2025 capex
% of total capex on
undeveloped projects
requiring $80/bbl
Required
Breakeven
Oil Price Status*
($M) (%) (%) ($/bbl)
1 Bosi, NG Nigeria Atlantic Ocean, NG Deep water 5,381 2% 7% 112 Under study
2 Pierre River, CA Canada Alberta, CA Oil sands (mining) 6,543 2% 8% 100 - 113 Deferred
3 Vicksburg, US United States Gulf of Mexico deepwater, US Ultra deepwater 2,141 1% 3% 100 Under study
4 Carmon Creek, CA Canada Alberta, CA Oil sands (in-situ) 3,429 1% 4% 99 Approved
5 Bolia, NG Nigeria Atlantic Ocean, NG Deep water 2,711 1% 4% 93 Not disclosed
6 Aktote, KZ Kazakhstan Atyrau, KZ Conventional 2,188 1% 3% 90 Not disclosed
7 Parque dos Doces, BR Brazil Espirito Santo, BR Ultra deepwater 1,912 1% 2% 90 - 121 Not disclosed
8 Bobo (OPL 322), NG Nigeria Atlantic Ocean, NG Ultra deepwater 3,074 1% 4% 86 Not disclosed
9 Athabasca Oil Sands Project, CA Canada Alberta, CA Oil sands (mining) 7,235 2% 9% 83 - 85 Ongoing
10 Bonga, NG Nigeria Atlantic Ocean, NG Deep water 5,297 2% 7% 83 Under development/study
- Total Top 10 Discoveries - - 39,912 12% 52% - -
- Other projects - - 37,112 11% 48% - -
- Total - - 77,024 23% 100% - -
*as understood based on company disclosures
Shell's 10 largest high-cost ($80/bbl+ BEOP) projects
Source: CTI and Rystad
48. Returns and price to book
• Shell’s current Price/Book ratio is 1.4x
• Sustaining a 1.5x Price/Book ratio needs projects with returns of around 20%
0.0 0.5 1.0 1.5 2.0 2.5
30%
25%
20%
15%
10%
NPV uplift at different IRR rates ($ value per $ capex @ 10% cost of capital)
Source: Own estimates
49. Price to book history (RDS)
• Price to book: A market indicator of perceived value added
Source: Morningstar
50. Conclusions
• Weak demand can cause price pressure (2020-2030?)
• Industry continues to develop high cost fields which increases
oil price risk
• Industry returns have fallen due to tax and inflation removing
much of the benefit from higher prices. Ongoing trend?
• Capital intensive projects – such as tar sands – have also
played an important role in lowering returns. Ongoing trend?
• Lower returns will lead to further derating (Price/Book)
• Value destruction: Oil price risk and project risk
52. True OPEC cost curve
• Social costs push OPEC’s required price to around $100
Source: APIC, Arab Petroleum Investments Corporation
53. Non OPEC cost curve
• Demand out till 2035 could be met at a non-OPEC marginal price of $80-90
54. 54
Material value at risk in 10 year plus phase
• Around 40% of a company’s NPV is still at risk post 10 years
0%
5%
10%
15%
20%
25%
30%
35%
1-5 5-10 10-15 15-20 20-25 25-30 30 beyond
Net present value profile under business as normal
57. High Carbon = High Cost
The “carbon” cost of extraction for a high
carbon crude can be four times that of
the lowest
Carbon intensity rises with:
• Crude gravity (heavy crude needs more
upgrading= high carbon)
• Flaring of associated gas
• Distance to market
58. Energy sources to 2050
Note: For reference, we convert from EJ to MBPD at a rate of 1 EJ = 0.48 MBPD of oil. Source: IEA
Total primary energy supply in the IEA 6DS, 4DS, and 2DS scenarios, 2009-2050 (Exejoules)
59. The lesson of 1979 (oil) and 2013 (coal)
• 1979
– Five years of weak
demand
– Nearly 20 years of
falling/flat oil prices
• 2013
– The rise of cheap
shale gas had a
swift impact on coal
prices
30
40
50
60
70
80
0
5
10
15
20
25
30
35
40 1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Oil price (nominal $) Demand (mb/d): RHS
Source: BP Statistical Review of World Energy 2013
Source: IEA, 29 January 2014
Coal prices
Oil prices and demand
60. Lead times
Lead times can be 10 years plus
Source: Shell letter / Shell presentations
61. Non-OPEC versus OPEC
• 1979 demand slip increased
OPEC’s spare capacity
• Similar trend to 2020 driven by
unconventionals – barring OPEC
supply interruptions
• Position in 2020-2030
dependent on demand scenario
Source: BP 2030 World Energy Outlook
62. Energy sources to 2050
• 2050 oil demand: 4DS is around 100mb/d, 2DS is around 60mb/d.
Note: For reference, we convert from EJ to MBPD at a rate of 1 EJ = 0.48 MBPD of oil. Source: IEA
Total primary energy supply in the IEA 6DS, 4DS, and 2DS scenarios, 2009-2050 (Exejoules)
63. Part of the answer: Costs and tax take more of the “oil” cake
• Industry cash flow over 2010-14 was the same as 2000-2004
• Costs have doubled – effectively halving cash returns
Split of upstream revenues ($/boe)