Statoil: In Global Energy Transition, ‘Winners Will Provide Energy With the Lowest Cost and Carbon Footprint Possible’
Wall Street Journal:
Norway’s state-owned oil giant Statoil ASA said it was rebalancing its business model so far toward renewables and cleaner fossil fuels that the company’s value would rise even if the world’s governments took drastic actions to limit carbon emissions.
In a stress test the company published in its sustainability report Friday, Statoil found it was planning for a tougher future than the one suggested by mainstream forecasts regarding the impact on the energy industry from more stringent action on climate change.
Statoil’s assessment reflects the continuing pressure on big oil companies from investors and governments to adapt, ahead of tougher regulations on climate change. The company is amid a shift away from the dirtiest oil extraction techniques, has applied tough internal assumptions on oil and carbon prices and is trying to reduce its own emissions.
The company is preparing for strict new government regulations based on a framework world leaders agreed to in Paris in December 2015. The agreement between more than 200 countries pledged to cap emissions and limit the global rise in temperature.
While it remains unclear how governments will achieve the agreement, Statoil believes its “net present value” will rise 6% under the core scenario to limit global warming envisioned by the International Energy Agency. In this scenario, the Paris-based energy monitor envisions governments removing fossil fuel subsidies and, in many places, implementing a carbon price of $100 a ton by 2030 to help keep global temperatures from rising more than 2 degrees Celsius by the end of the century.
In 2016, Statoil said a similar climate-change scenario would reduce the company’s value by about 5% compared with expectations based on its own internal planning outlook. Net present value is a way of analyzing company’s potential profitability based on the estimated current value of its investments and future cash flows.
“We believe that we’re in a period of energy transformation over the next decade,” said Bjørn Otto Sverdrup, Statoil’s head of sustainability. “The winners in the industry will be the ones that are able to provide energy with the lowest cost and carbon footprint possible.”