International oil giant wipes 3.3 billion barrels from books
Entire Kearl oil-sands project in western Canada de-booked
Exxon Mobil Corp. disclosed the deepest reserves cut in its modern history as prolonged routs in oil and natural gas markets erased the value of a $16 billion oil-sands investment and other North American assets.
The equivalent of about 3.3 billion barrels of untapped crude was removed from the so-called proved reserves category in Exxon’s books, the Irving, Texas-based explorer said in a statement. The revisions were triggered when low energy prices made it mathematically impossible to profitably harvest those fields within five years. The sprawling, 3.5-billion barrel Kearl oil-sands development in western Canada accounted for most of the hit.
The 19 percent drop amounts to the largest annual cut since at least the 1999 merger that created the company in its modern form, according to data compiled by Bloomberg. That includes 1.5 billion barrels of reserves that were pumped from wells. The previous record cut was a 3 percent reduction taken during the height of the global financial crisis in 2008. The reserves are now at their lowest since 1997.
The shares gained 0.2 percent to $81.08 in after-hours trading as of 5:46 p.m. in New York on Wednesday, after closing at $80.93.
Exxon, facing a U.S. Securities and Exchange Commission probe into how it valued its portfolio amid the worst oil market collapse in a generation, signaled in October and again last month that the revision was probably coming.
The oil-sand mines in northern Alberta are among the costliest types of petroleum projects to develop because the raw bitumen extracted from the region must be processed and converted to a thick, synthetic crude oil. As such, they have been particularly hard hit by the worst oil slump in a generation.
ConocoPhillips on Tuesday removed the equivalent of 1.15 billion barrels of oil-sands crude from its books as part of a 21 percent cut that pushed the Houston-based company’s reserves to a 15-year low.
The world has begun a rapid switch to electric vehicles. In the first half of this year, worldwide sales were up 57 per cent to 285,000, despite low oil prices, and there are now more than 1m electric cars on the world’s roads for the first time ever.
Last February, Bloomberg New Energy Finance (BNEF) forecast that electric vehicles would account for 35 per cent of new car sales by 2040, and perhaps more under certain scenarios.
The reason for this bullishness is not just that battery costs are plummeting – down 65 per cent in the past five years – it is also that electric vehicles outperform internal combustion cars in so many key areas. They drive more smoothly and accelerate better; they can be charged without a trip to the petrol station; they require less maintenance; they help solve air quality problems; and they increase the autonomy of oil-importing countries.
The rapid uptake of electric vehicles has given established car companies a huge shock. Tesla, the upstart technological leader, expected to produce 85,000 vehicles this year, has a market value of $32bn. That’s more than half of the value of General Motors, which makes nearly 120 times as many vehicles.
All of the incumbent car companies are racing to adjust their strategies, putting electric vehicles at their heart. Volkswagen, still reeling from the “Dieselgate” scandal, is intending to invest $11.2bn over the next decade to push electric vehicles to 25 per cent of its sales.
Bill will drop coal, oil and gas investments from Ireland Strategic Investment Fund
Ireland has voted to be the world’s first country to fully divest public money from fossil fuels.
The Irish Parliament passed the historic legislation in a 90 to 53 vote in favour of dropping coal, oil and gas investments from the €8bn (£6.8bn) Ireland Strategic Investment Fund, part of the Republic’s National Treasury Management Agency.
The bill, introduced by Deputy Thomas Pringle, is likely to pass into law in the next few months after it is reviewed by the financial committee.
“This principle of ethical financing is a symbol to these global corporations that their continual manipulation of climate science, denial of the existence of climate change and their controversial lobbying practices of politicians around the world is no longer tolerated,” Mr Pringle said.
“We cannot accept their actions while millions of poor people in underdeveloped nations bear the brunt of climate change forces as they experience famine, mass emigration and civil unrest as a result.”
Once enacted, the bill would force the Ireland Strategic Investment Fund to sell its investment in fossil fuel industries over the next five years.
In 2015, Norway’s sovereign pension fund divested from some fossil fuel companies, but not all.
The plan is to invest in the technology needed for battery electric vehicles
Diesel technology is set to be a thing of the past, UK car industry executives believe.
The plan is to invest in the technology needed for battery electric vehicles over the next five years, according to 93% of executives while 62% felt that diesel is losing its importance for manufacturers.
Figures from KPMG’s annual global automotive executive survey also show that 90% of executives expect battery electric vehicles to dominate the marketplace by 2025.
John Leech, of KPMG, said:
“Improvements in the cost and range of battery technology, coupled with growing concern over the emission of both carbon dioxide and nitrogen oxides from diesel engines, means that almost the whole automotive industry believes that the mass adoption of electric cars will happen during the next decade.”
Senior executives working for vehicle manufacturers, suppliers, dealers, financial and mobility service providers plus car users took part in the survey.
Some 74% of executives thought more than half of car owners today would not want to own a vehicle.
Researchers believe there will be fewer cars and therefore less money to be made from building vehicles in the future as people may opt to use, rent or pay for a car service rather than to own a car.
This was not feared as a looming problem because 85% of executives were convinced their company might make more money by providing new digital services than by selling cars alone.
Mr Leech said:
“Carmakers plan to sell a myriad of new digital services to vehicle users. Today car makers already make substantial profits from the sale of consumer finance and annual vehicle insurance but this will grow in the future as innovative services such as remote vehicle monitoring and the integration of the car as a focal point in people’s ever more connected lifestyles are demanded by consumers.”
At the World Economic Forum in Davos, carmakers and energy companies have announced the foundation of the Hydrogen Council to lay the foundations for major investment in hydrogen.
Bringing together oil giants such as Royal Dutch Shell and Total and car manufacturers such as Toyota, Daimler, BMW and Hyundai, the global initiative is the first of its kind and aims to drive forward the hydrogen fuel cell industry, as well as hydrogen in the power, industrial and residential sectors. It will also act as a voice to further this vision.
Essentially it shows the oil industry and the car industry joining in an initiative to develop fuel cell technology. This is not a bad technology, but there is no end of well researched information highlighting that it is not the best way to go. For example Zachary Shahan’s post Why Hydrogen Fuel Cell Cars are Not Competitive.
My opinion is simple. This is an initiative for the fossil fuel industry to try and bring itself back to relevancy as the world is tipping away towards renewables.
Of course fuel cells can burn on hydrogen created by renewables, but equally the oil and gas industry can create them directly from fossil fuels. In addition, the complexity and cost of the infrastructure required to deliver hydrogen safely makes it a wrong decision designed to help a particular industry rather than further the needs of our world.
“Switching transportation from petroleum to renewable or alternative fuels is not the most cost-effective way to reduce GHG [greenhouse gas] emissions.”
This is the message that ExxonMobil has delivered to the UK Department for Transport (DfT) in three separate presentations since the Paris climate deal was agreed last December, reveal documents obtained by DeSmog UK.
Exxon appears to be the only major fossil fuel company currently heavily lobbying the British government against greener transport policies, according to the DfT’s response to DeSmog UK’s Freedom of Information (FOI) request.
The presentations by Exxon and correspondence between Peter Clarke, a director at Exxon, and the Department Secretary Patrick McLoughlin show the oil giant lobbying on biofuels, transport and carbon reduction, and the Fuels Quality Directive – all policy issues that impact the decarbonisation of our transport system and up-take of electric vehicles.
The document release comes as the government’s environmental audit committee warned the UK is “falling behind” on its electric vehicle targets.
The committee criticised ministers for failing to implement the proper incentives and infrastructure needed to encourage the growth of the sector. Increasing the number of electric vehicles is critical if the UK is to tackle both climate change and harmful air pollution.
New finds at lowest since 1947 and headed even lower: WoodMac
Explorers replacing just 6% of resources they drill: Rystad
Explorers in 2015 discovered only about a tenth as much oil as they have annually on average since 1960. This year, they’ll probably find even less, spurring new fears about their ability to meet future demand.
With oil prices down by more than half since the price collapse two years ago, drillers have cut their exploration budgets to the bone. The result: Just 2.7 billion barrels of new supply was discovered in 2015, the smallest amount since 1947, according to figures from Edinburgh-based consulting firm Wood Mackenzie Ltd. This year, drillers found just 736 million barrels of conventional crude as of the end of last month.
That’s a concern for the industry at a time when the U.S. Energy Information Administration estimates that global oil demand will grow from 94.8 million barrels a day this year to 105.3 million barrels in 2026. While the U.S. shale boom could potentially make up the difference, prices locked in below $50 a barrel have undercut any substantial growth there.
New discoveries from conventional drilling, meanwhile, are “at rock bottom,” said Nils-Henrik Bjurstroem, a senior project manager at Oslo-based consultants Rystad Energy AS.
“There will definitely be a strong impact on oil and gas supply, and especially oil.”
Many things have gotten harder as the world settles into a protracted spell of low oil prices and sluggish growth — from avoiding deflation to creating jobs. One thing has gotten easier, as well as more urgent: eliminating fossil-fuel subsidies.
Governments have long paid lip service to this idea. The G-20 has been promising to phase out fuel subsidies since 2009, but the measures remain widespread and resilient.
Nations from the U.S. to the U.K. to Russia continue to spend billions on tax breaks and other subsidies for the production of oil, gas and coal. Japan, South Korea and China support massive fossil-fuel projects outside their borders. For years, many countries — including some of the world’s biggest energy producers — have also used subsidies to lower gasoline and diesel prices, supposedly to help the poor.
The sums involved are huge. The International Energy Agency estimates that countries spent $493 billion on consumption subsidies for fossil fuels in 2014. The U.K.’s Overseas Development Institute suggests G-20 countries alone devoted an additional $450 billion to producer supports that year.
These ridiculous outlays would be economically wasteful even if they didn’t also harm the environment. They fuel corruption, discourage efficient use of energy and promote needlessly capital-intensive industries. They sustain unviable fossil-fuel producers, hold back innovation, and encourage countries to build uneconomic pipelines and coal-fired power plants. Last and most important, if governments are to have any hope of meeting their ambitious climate targets, they need to stop paying people to use and produce fossil fuels.
U.S. companies erased more than 20 percent of inventories
Regulator examined estimates as wells lingered on books
Ultra Petroleum Corp. was a shale success story. A former penny stock that made the big leagues, it was worth almost $15 billion at its 2012 peak.
Then came the bust. Almost half of Ultra’s reserves were erased from its books this year. The company filed for bankruptcy on April 29 owing $3.9 billion.
Ultra’s rise and fall isn’t unique. Proven reserves — gas and oil resources that are among the best measures of a company’s ability to reward its shareholders and repay its debts — are disappearing across the shale patch. This year, 59 U.S. oil and gas companies deleted the equivalent of 9.2 billion barrels, more than 20 percent of their inventories, according to data compiled by Bloomberg. It’s by far the largest amount since 2009, when the Securities and Exchange Commission tweaked a rule to make it easier for producers to claim wells that wouldn’t be drilled for years.
The SEC routinely questions companies about their reserves. Now, agency investigators are also on the hunt for inflated reserves estimates, according to a person familiar with the matter.
“Reserves make up a large share of the value of these companies, so it really matters,” said David Woodcock, a partner at Jones Day in Dallas who served as the SEC regional director in Fort Worth, Texas, from 2011 to 2015.
“They’re looking even more closely at how companies are booking reserves, how they’re evaluating the quality of those reserves and what their intentions really are. They’re not accepting pat answers.”
Drillers face pressure to keep reserves growing. For many, the size of their credit line is tied to the measure. Investors want to see that a company can replace the oil and gas that’s been pumped from the ground and sold.
To help fight climate change, France’s Total commits to leaving some fossil fuels in the ground.
One of the world’s biggest oil companies is factoring global goals for combating climate change into its multi-decade business plan.
French oil giant Total acknowledged in a report released Tuesday that “a part of the world’s fossil fuel resources cannot be developed” if nations are to fulfill the Paris climate accord agreement to hold global temperature increases to 3.6 degrees Fahrenheit.
The company stood by a 2015 decision to reduce investments in oil production from Canadian tar sands, adding that it confirmed at that time “that we do not conduct oil exploration or production operations in the Arctic ice pack.” Total first announced its position on Arctic drilling in 2012, according to Reuters.
Total’s leaders are “trying to link their strategies and investments to climate decisions,” said Alexander Shestakov, the director of the World Wildlife Fund’s global Arctic program.
“That’s a positive sign coming from one of the world’s oil majors.”