The twenty projects in CTI’s study represent almost $91 billion in capital investment over the next ten years, and yet CTI, a financial think tank that examines climate risk, reports that limited specific information on the projects’ economics are shared between investors and project managers.
“Investors are concerned about the levels of capital being sunk into future fields by the oil sector, but are not getting answers on the economics of the projects from the companies,” said James Leaton, CTI’s research Director, in a press release. “CTI has responded to demand for detail to enable shareholders to challenge where money is spent.”
Costly and technically-challenging projects in the Gulf of Mexico and Alberta’s oilsands are currently under consideration by BP, ConocoPhillips, ExxonMobil, Chevron, Total, Eni and Royal Dutch Shell. These projects would require $357 billion in investments, according to CTI.
However, to offer any return on these massive investments, most of the 20 oil projects on CTI’s list would require oil prices to go above $110 a barrel. Some in the oilsands would require $150 per barrel. Faced with growing emission regulations and potential drops in barrel prices, these projects stand to lose their investors significant coin. In their study, CTI states that their intent is to alert companies to the likely scenario of being left with these stranded assets.
“This analysis demonstrates the worsening cost environment in the oil industry, and the extent to which producers are chasing volume over value at the expense of returns,” says Andrew Grant, a CTI Analyst. “Investors will ask whether it is prudent for oil companies to bet on ever higher oil prices when they could be returning cash to shareholders.”
On Friday, September crude was priced at $97 bbl in New York.