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Oil majors impeding UN climate goals with $50B in new projects, report says

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Oil majors impeding UN climate goals with $50B in new projects, report says

Oil majors could be left holding stranded assets as they continue to invest heavily in oil and natural gas while governments around the world look to cut emissions and meet the goals of the Paris Agreement on climate change, according to a new report from climate-focused think tank Carbon Tracker Initiative.

The report found that although oil majors have approved $50 billion of projects since 2018, these proposed assets will not deliver adequate financial returns amid the agreement's goal of limiting global warming to below 2 degrees Celsius from preindustrial levels and to "pursue efforts" to limit global warming to 1.5 degrees C.

"Every oil major is betting heavily against a 1.5 degrees C world and investing in projects that are contrary to the Paris goals," Carbon Tracker senior analyst and report author Andrew Grant said in a news release accompanying the Sept. 5 report.

The report warns that oil and gas companies risk wasting $2.2 trillion by 2030 if they base investment decisions on current emissions policies. Current policies lead to increasing strains on almost all aspects of energy security and a major additional rise in energy-related CO2 emissions, the International Energy Agency said.

The Carbon Tracker study estimated that oil and gas companies would spend $6.5 trillion by 2030 on new production in the scenario to limit global warming to 2.7 degrees, which was outlined under the IEA's "new policy" scenario. Under the new policy scenario, CO2 emissions keep rising gradually to 2040.

In contrast, investment in projects that fit under the IEA's "sustainable development" scenario to limit global warming to 1.6 degrees C amounts to $4.3 trillion and would see CO2 emissions peaking soon and entering a steep decline to 2040. Carbon Tracker concluded that the higher cost projects are at risk of becoming stranded.

Oil majors are making efforts to achieve Paris agreement goals and demonstrate environmental stewardship, with the European majors ahead of their U.S. counterparts.

In March, for the first time, Royal Dutch Shell PLC set a short-term goal of reducing its emissions by 2% to 3% from 2016 levels through 2021. The emissions reductions, which include Scope 3 emissions, will occur directly from Shell's operations and energy products. To help Shell maintain these proposed short-term emissions reduction targets, the major plans to increase its investments in non-oil technologies and renewables and also said in March that it could become the world's largest power company by 2035.

Exxon Mobil Corp. said May 2018 that by 2020, it plans to reduce its global methane emissions by 15% from 2016 levels and to lower natural gas flaring across its global operations by 25%.

However, the Carbon Tracker report shows that more than 90% of Exxon's planned spending from 2019-2030 will be on projects "outside a 1.6 degrees C pathway." This compares to 70% at Shell, 67% at TOTAL SA, 60% at Chevron Corp., 57% at BP PLC and 55% at Eni SpA.

The analysis further identified 18 major projects sanctioned in 2018 that are outside even the 1.7 degrees C to 1.8 degrees C pathway. Those include Shell's $13 billion liquefied natural gas project in Canada; BP, Chevron, Exxon and Equinor's $4.3 billion ACG deepwater oil project in Azerbaijan; and BP, Exxon, Total and Equinor ASA's $1.3 billion Zinia 2 deepwater oil project in Angola.