OPEC and Russia gain victories from climate activists

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Climate activists who scored big wins against Western majors last week have had unlikely cheerleaders in the oil capitals of Saudi Arabia, Abu Dhabi and Russia.

Defeats in the courtroom and boardroom mean Royal Dutch Shell (RDSa.L), ExxonMobil (XOM.N) and Chevron (CVX.N) are all under pressure to cut emissions faster of carbon. This is good news for the Saudi national oil company Saudi Aramco (2222.SE), Abu Dhabi National Oil Co and the Russian Gazprom (GAZP.MM) and Rosneft (ROSN.MM).

This means more business for them and for the Organization of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia.

“The demand for oil and gas is far from peaking and supplies will be needed, but international oil companies will not be allowed to invest in this environment, which means national oil companies must intervene,” he said. said Amrita Sen of consulting firm Energy Aspects.

Climate activists have won a major victory with a Dutch court ruling forcing Shell to cut emissions significantly, which in effect means cutting oil and gas production. The company will appeal.

On the same day, America’s two biggest oil companies, Exxon Mobil and Chevron, both lost battles with shareholders who accused them of dragging their feet on climate change.

The International Energy Agency, which deals with energy policies in the West, appealed last month to the world to essentially abandon all new oil and gas developments. But he gave no clear formula on how to reduce demand.

“It (the IEA report) is a sequel to the movie La La Land. Why should I take it seriously?” Saudi Energy Minister Prince Abdulaziz bin Salman said Tuesday.

“We (Saudi Arabia) produce low cost oil and gas and produce renewable energy. I urge the world to accept this as a reality: that we are going to be the winners in all of this activity, ”he said in an online press conference after a regular OPEC + meeting.

HOSTILE REGIMES

A high-level executive from the Russian group Gazprom said: “It looks like the West will have to rely more on what it calls ‘hostile regimes’ for its supply.”

Saudi Aramco, Adnoc and Gazprom all declined to comment. Oil major Rosneft, in which the Russian state has the largest stake, also declined to comment.

Western oil majors like Shell have grown tremendously over the past 50 years as the West seeks to reduce its reliance on energy from the volatile Middle East and Russia.

These same Western energy majors, including BP (BP.L) and Total (TOTF.PA), have drawn up plans to sharply reduce emissions by 2050. global warming.

Saudi Aramco, listed on the Saudi Stock Exchange but majority owned by the state, is not facing the same kind of pressure to reduce its carbon emissions, although the kingdom’s rulers aim to sharply increase the use of renewable energy in the country. .

Gazprom expects the demand for natural gas to increase in the coming decades and to play a larger role in energy consumption than renewables and hydrogen.

Western oil majors control around 15% of global production, while OPEC and Russia have a share of around 40%. This share has been relatively stable over the past decades, as growing demand has been met by new producers like small private US shale companies, which face similar climate-related pressures.

DIVIDEND PIC

Since 1990, global oil consumption has grown from 65 million barrels per day to 100 million barrels per day, with Asia providing the lion’s share of the growth.

Countries like China and India have made no commitments to reduce oil consumption, which, on a per capita basis, is still only a fraction of Western levels. China will depend heavily on gas to reduce its huge coal consumption.

Despite pressure from activists, investors and banks to cut emissions, Western oil majors are also tasked with keeping dividends high amidst heavy debt. Dividends from oil companies represent significant contributions to pension funds.

“It is vital that the global oil industry aligns its production with the Paris targets,” said Nick Stansbury of Legal & General, which manages £ 1.3 trillion ($ 1.8 trillion) in assets for the account of savers, retirees and institutions. “But it must be done in tune with politics, changes on the demand side and the reconstruction of the global energy system.

“Forcing a company to do it in court can (if it is effective) only result in higher prices and lost profits,” Stansbury said. Legal & General, one of the largest fund managers in the world, owns assets in most of the major oil companies.

Climate lawsuits have been filed in 52 countries over the past two decades, 90% of which are in the United States and the European Union, risk consultancy firm Verisk Maplecroft said.

“The same oil and the same gas will always be produced. Just with lower ESG standards, ”said an executive from a Middle Eastern producer, who previously worked for an oil major, referring to environmental, social and governance performance metrics.

Our standards: Thomson Reuters Trust Principles.

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