Top 20 undeveloped oil projects will risk $91bn of investment

As investors begin to ask for more information around the risks of high-cost oil projects, the Carbon Tracker Initiative (CTI) has revealed that some of the most expensive projects currently being considered for development in the industry could place $91 billion (£54bn) of investors’ money at risk.

In May, CTI warned that many oil projects make “neither economic nor climate sense”, with as much as $1.1 trillion (£660bn) of investors money at stake. The research argued that oil companies are betting on a high demand, high price scenario, despite global action to curb emissions and move towards a low-carbon economy.

The latest study builds on this and ranks oil majors on their capital expenditure exposure to undeveloped, high cost projects. Topping this list are six projects, all located in Canada and involving oil sands.

Oil sands are particularly controversial because they are far more polluting than conventional fossil fuel sources. The project ranked the most risky is from ConocoPhillips, which would require a market price of $159 (£95) per barrel.

Deep-water projects in the Atlantic, as well as a project exploring the possibility of operations in the fragile ecosystem of the Arctic, also feature on the top 20 list.

All the projects on the list require at least $95 (£56) a barrel for sanction, with several needing prices to reach above the $120 (£71) mark. The global Brent oil benchmark has ranged between $99 (£59) and $114 (£68) over the past 12 months.

In the last decade oil prices per barrel have even fallen as low as $40 (£23) twice. However, with tightening climate laws these lows could become more frequent, potentially placing investors money at risk if they are exposed to falling oil prices.

Andrew Grant, CTI analyst, commented, ”This analysis demonstrates the worsening cost environment in the oil industry, and the extent to which producers are chasing volume at the expense of returns.

“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.”

CTI hope the report will alert institutional investors to the risks of investing in projects that depend on sustained higher prices to make a return.

Photo: Howl Arts Collective via Flickr

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Further reading:

$1.1tn of ‘high cost’ oil investments at risk

Oil companies are putting investors’ money at risk

Carbon Tracker’s latest analysis is a warning to fossil fuel investors everywhere

Keystone XL a ‘high-risk’ investment with minimal economic benefits

Shell ‘underestimating’ climate change risks to investors