Olie- en gasbedrijven zouden weleens veel minder waard kunnen zijn dan we denken. Hun waarde is nu gebaseerd op de verwachting dat alle bekende fossiele brandstoffen worden opgebruikt. Maar steeds meer investeerders denken dat door strengere milieuwetgeving tenminste een deel van deze voorraden voor eeuwig onder de grond blijft zitten.
A major threat to fossil fuel companies has suddenly moved from the fringe to center stage with a dramatic announcement by Germany’s biggest power company and an intriguing letter from the Bank of England.
A growing minority of investors and regulators are probing the possibility that untapped deposits of oil, gas and coal -- valued at trillions of dollars globally -- could become stranded assets as governments adopt stricter climate change policies.
The concept gaining traction from Wall Street to the City of London is simple. Limits on emissions of carbon dioxide will be necessary to hold temperature increases to 2 degrees Celsius, the maximum climate scientists say is advisable. Without technologies to capture the waste gases from combusting fossil fuels, a majority of known oil, gas and coal deposits would have to stay underground. Once that point is reached, they become stranded.
With representatives from more than 190 countries gathered to discuss climate rules in Lima, the argument that burning all the world’s known oil, gas and coal reserves would overwhelm the atmosphere is moving beyond the realm of environmental activists.
Storebrand ASA (STB), a Scandinavian financial services company managing $74 billion of assets, announced last year that it would divest from 19 fossil fuels companies. That list has since expanded to 35, including 15 coal producers, 10 oil-sand miners and 10 utilities that predominantly use coal.
“It was a financial and climate-related decision, and there was very much a consideration of stranded assets,” Christine Torklep Meisingset, Storebrand’s head of sustainable investments, said by phone from Oslo. “Companies that specialize in carbon-intense projects are very vulnerable to climate policy and shifting regulations.”
Former U.S. Vice President Al Gore likens today’s fossil fuels to the subprime mortgages of the last decade that triggered the global credit crisis. Their value “is based on an assumption every bit as absurd,” specifically the notion that all known oil, gas and coal will be consumed.
“Investors who haven’t yet come to grips with the stranding problem are like the classic scene in the Road Runner cartoons where the coyote runs off the edge of the cliff, and his legs keep moving for quite a long time before gravity takes hold,” Gore said by phone from Nashville, Tennessee. “There are investors out there whose legs are moving in mid-air.”
Energy majors such as Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), Royal Dutch Shell Plc (RDSA) and Glencore Plc (GLEN) say they’re not concerned about stranded assets because demand is growing, and fossil fuels will be the only way to satisfy those needs cheaply and reliably for decades to come.
Even as oil prices have dropped sharply, some operators and regulators are taking note of the risks from exposure to fossil fuels. EON SE, Germany’s biggest utility and second-largest polluter, said two days ago it will spin off its fleet of dirty, aging power stations and oil fields to focus on renewable energy.
Hours later, a letter emerged from Bank of England Governor Mark Carney to a committee in Parliament stating that he had instructed his staff to review whether sizable losses from stranded coal, oil and gas reserves could hurt banks, investors, insurance companies and the rest of the financial system.
Any risks to investors will unfold over many years. A panel of climate scientists gathered by theUnited Nations estimates that a so-called carbon budget, a theoretical amount of carbon that can be burned without breaching the 2-degree threshold, will permit fossil fuel use to continue at current rates until 2033. At that point, though, only 15 percent to 30 percent of currently recoverable reserves will have been consumed, the panel said last month, leaving the bulk of known fossil fuels stranded.
The industry disagrees. BP this year said in its sustainability report that the concept of unburnable carbon “overstates the potential financial impact” on the value of oil explorers. Shell said rising demand will preserve the value of its assets.
Exxon told activist investors in March that it’s “confident” none of its reserves are in danger of becoming stranded. Chevron Chief Executive Officer John Watson, in a Sept. 30 interview, addressed the issue confidently.
“We’re going to be in the fossil fuels business for a long time,” he said.
Mark Lewis, an analyst at Kepler Cheuvreux SA in Paris, estimates a 2-degree pathway would spell lost revenue for oil, coal and gas companies totaling $28 trillion over the next two decades.
As a utilities analyst at another bank years ago, Lewis said he asked power companies how they would combat the threat to their fleet of coal-fired plants from wind and solar.
What threat? came the response.
The oil companies “are in denial in exactly the same way that the German utilities were 10 years ago,” Lewis said. “Not only did they not see the renewables revolution coming along, they dismissed it out of hand.”
Traditional power generation in Europe has been squeezed as European governments subsidized and prioritized wind and solar power to cut carbon emissions. Germany’s two biggest utilities, RWE AG and EON, have both lost about three-quarters of their values since peaking in early 2008. The German benchmark DAX index gained more than 20 percent since then.
Lothar Lambertz, a spokesman for RWE, and Markus Nitschke, an EON spokesman, both cited renewables as hurting the profits of fossil fuel-fired power plants in Germany. The two companies are closing or mothballing more than 19,000 megawatts of coal and gas plants over four years, citing reasons including air pollution regulations.
The German utilities are “on their knees,” said Lewis. “These things can happen much more quickly than you think.”
When analysts at the Carbon Tracker Initiative in London wrote about carbon budgets in a 2012 report called “Unburnable Carbon,” it caught the eye of U.S. environmentalist Bill McKibben, co-founder of 350.org, which campaigns to fight global warming. He began mobilizing students to lobby universities to divest their endowments from fossil fuels, much as they had withdrawn funding from Apartheid-era South Africa.
Storebrand’s decision to divest shows how the concept of stranded assets and general environmental concerns can become intertwined. Divestment pledges by 181 institutions and 656 individuals represent more than $50 billion of assets, Washington-based Arabella Advisors said in September.
That’s a drop in the ocean compared with more than $5 trillion in global market value for over 2,000 oil, coal and gas companies, according to data compiled by Bloomberg. Those companies have long-term debts totaling almost $2 trillion.
“The plan here is not to bankrupt the fossil fuel industry. We can’t do that,” McKibben said. “The plan is to politically bankrupt them. When honored institutions do this kind of thing, it weakens their legitimacy.”
Institutions opting to divest now include Stanford University in California and The Rockefeller Brothers Fund, built with profits from Standard Oil Co.
“The world has changed when the Rockefeller family decides that they are going to divest from fossil fuels,” the UN’s top climate diplomat, Christiana Figueres, said yesterday in Lima.
Many more are debating getting out. At the University of California, Chief Investment Officer Jagdeep Baccher is reviewing the investment strategy for the school’s $91 billion portfolio, which is about 10 percent invested in fossil fuels. He hasn’t yet ruled divestment in or out, and is considering wider strategies to invest in carbon-cutting technologies.
“We’ve thought about stranded assets and looked at carbon budgets: we all agree there is a risk,” said Baccher. “How can you ignore the issue?” He said he has sought advice from Gore.
The biggest weakness in the argument for stranded assets lies in its central assumption that the world will adopt policies to limit temperature gains to 2 degrees Celsius.
The UN Environment Program estimates that to meet that goal, annual emissions must not exceed 44 gigatons in 2020. Current pledges to reduce emissions would only lower them to 52 gigatons to 54 gigatons.
The International Energy Agency estimates the planet is on track to warm by 3.6 degrees Celsius. Investment in renewables needs to quadruple to an average of $1.6 trillion every year through 2040 to meet the 2-degree target, IEA Chief Economist Fatih Birol said.
The conference in Peru’s capital is designed to lead to a climate deal in Paris next year that would come into force in 2020, replacing the 1997 Kyoto Protocol, which set targets only for rich countries.
Whatever happens to carbon limits, the best-known road to salvation for the fossil fuel industry lies in an elusive technological approach called carbon capture and storage, which involves trapping carbon emissions and storing them permanently underground. This would permit continued burning of oil, gas and coal, but only about a dozen of these sites currently exist around the world because of high costs.
Inaction so far makes more dramatic policies necessary in the years ahead to avoid breaching the 2 degree threshold. Stiffer limits would pose even greater dangers to the conventional energy industry and its underground troves.
“Before very long there will be a widespread recognition that most of these assets are never going to be burned,” said Gore.