The global push for action on climate change has put the long-term predictions of major energy companies in an oddly contingent light. Investors want to know about their long-term assumptions, but it is difficult for anyone to forecast how the wrangling over international climate policy will pan out; not to mention complex debates over peak oil, future price levels, and their interaction with the wider economy.
Not everyone is happy with how the oil majors are making their forecasts. FairPensions, a UK campaign currently urging investors in BP and Shell to seek clarification on oil sands investments, argues that the companies are not adequately considering the effects of environmental policies, high oil prices, and changes in demand, as their briefing for investors shows. The economic argument has focused on the assumptions that the companies use for their long-term outlook on oil prices, demand, and the likely effect of climate legislation.
A look at a few of the oil majors’ recent remarks does suggest they very much favour a business-as-usual scenario in their own long-term outlooks, rather than one that foresees either a sharp change in oil pricing or strong action on climate change.
On FT Energy Source:
- Just when it looked safe to talk carbon offsets…
- Cap-and-trade is/not dead – and what it means
- Falklands Islands oil hopes dampened somewhat
- T. Boone Pickens makes his move on water
- Pachauri finding, PetroChina’s bribery warning in Energy headlines
- Who, what, where of the new deepwater GoM projects
- Energy prices should rise the more you use
- Japanese trading firms, not oil companies, pursue shale gas and CBM
- All you wanted to know and more about power exchanges
- Why the US shouldn’t worry about China’s green leadership
- Can business do the job on its own?
- Tracing the demise of cap-and-trade
- Whoops: Energy Star approves ‘gas-powered alarm clock’
Proponents of the Clean Development Mechanism – the UN’s scheme for approving projects in the developing world to generate carbon offsets for use by developed countries covered by the Kyoto protocol – have some more bad news to contend with. Reuters reports:
The reputation of a Kyoto Protocol carbon finance scheme was dealt another blow after a UN climate panel late on Friday suspended the third emissions cut verifier in 15 months, and partially suspended a fourth.
The scheme’s executive board suspended emissions auditors TUEV SUED and partially suspended Korea Energy Management Corporation (KEMCO) after spot checks at the companies’ offices revealed procedural breaches.
The board, an arm of the UN’s climate change secretariat, said it will work with TUEV SUED and KEMCO to ensure timely resolution of the issues.
This follows the suspension of two other auditors in the past year (one has since been reinstated), all of which will fuel accusations that the whole offset system is fundamentally unworkable.
A New York Times story late last week looked at why cap-and-trade died as the climate policy tool of choice. The themes will be familiar to readers of this blog:
The short answer is that it was done in by the weak economy, the Wall Street meltdown, determined industry opposition and its own complexity.
In fact surveys suggest that even in the good times, few were enthusiastic about cap-and-trade beyond economic, financial trading and policy wonk circles. And a crucial voting constituency those groups do not make. The arguments that capping is necessary (it’s difficult to achieve an actual reduction target without one) and trading saves money (it allows emissions to be reduced in the cheapest possible way) either weren’t made clearly or were lost amongst a growing suspicion of derivatives, and loud opposition to any form of carbon pricing from some energy lobbyists.
Remember the excitement (and controversy) about new drilling for oil off the Falklands Islands by four UK companies?
Well, some initial exploratory drilling results are in, and they don’t sound especially promising:
The primary Liz target was encountered at around 2550 metres with indications of hydrocarbons while drilling. Subsequent logging operations have shown that oil may be present in thin intervals but that reservoir quality is poor. Wireline sampling is still to be carried out. Deeper gas shows have also been encountered while drilling, particularly below 3400 metres and these have still to be evaluated by wireline logging and sampling.