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From Covid-19 to climate: what’s next after the global oil and gas industry crash?

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping: Extracts from above headlined article published in Oil & Companies News 13/07/2020

The global oil and gas industry has crashed. In mid-June, BP – formerly British Petroleum – slashed the value of its assets by US$17.5bn and revealed plans to cut its workforce by 15%. It forecast the price of oil would be a third lower than expected for decades to come and said it may be forced to leave new fossil fuel discoveries in the ground.

It was later joined by Royal Dutch Shell, which announced its own US$22bn writedown, with its vast gas business – including major liquefied natural gas (LNG) developments in Australia – expected to take the heaviest toll.

Wood Mackenzie, a global energy research and consultancy group, says the fall in value is industry-wide, estimating US$1.6tn has been wiped from the sector this year, with more to come.

While oil and gas are not alone in struggling in the face of biggest economic slump in nearly a century, WoodMac says its carnage cannot solely be blamed on Covid-19. The economic reality of the climate crisis is also starting to bite.

If that reflects the global picture, the story among Australia’s oil and gas businesses – which until recently have been enjoying booming growth selling LNG to Asia, and driving most of the increase in national greenhouse gas emissions – is less clear.

The idea of stranded assets due to climate change is not new. It suggests carbon-intensive projects potentially worth trillions risk becoming next-to worthless – stranded…

In response to questions about Shell and BP’s writedowns, the Australian Petroleum Production and Exploration Association (Appea), representing oil and gas producers, did not mention climate risk.

Andrew McConville, Appea’s chief executive, said Covid-19 and the ongoing low oil price were having a “double-whammy effect” and that it would remain an “incredibly challenging time” for the sector even after the broader economy began to recover.

The reality is when you have a really wide range of future scenarios the risk of stranded assets is higher. And the risk of stranded assets is higher in Australia just by dint of the higher likelihood that people will take a bet on oil and gas compared to the EU, where they won’t.” Source: Guardian

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