With this report, Carbon Tracker demonstrates the mismatch between continuing growth in oil demand and reducing carbon emissions to limit global warming. Our most recent research with ETA to produce the carbon cost supply curve for oil indicates that there is significant potential production that could be considered both high cost and in excess of a carbon budget. We have focused our research on undeveloped projects that, allowing for a $15/bbl contingency, would need a $95/bbl market price or above to be sanctioned (i.e. a market price required for sanction of $95/bbl is equivalent to a project breakeven price of $80/bbl), as they are the marginal barrels that could be exposed to a lower demand and price scenario in the future.

(View the individual company fact sheets at the bottom of this page)

Following the publication of CTI’s oil cost curve, there has been demand for further detailed information on the breakeven cost prices of the projects the oil companies are considering. Engagement by investors through the Carbon Asset Risk programme and conversations with oil analysts have indicated limited specific information on project specific economics is made available.

To assist further engagement with companies, CTI has produced a new series of capex factsheets, starting with the majors. These provide a breakdown by the stage of project development for the largest projects being considered by these companies. This enables investors to identify the projects that are still seeking approval or have not started development which require high oil prices to breakeven.

To create shareholder value, oil majors need to reduce exposure to exploration projects requiring the highest oil prices, rather than solely pursue production volume. To help investors, CTI lists the top 20 undeveloped high-cost oil projects, by size. They are primarily a mix of Alberta oil sands and deep water projects in the Atlantic, representing $91 billion of capital (over the period 2014-25), which could be returned to shareholders rather than have oil firms gamble it away.

top-20-risky-projects

Top 20 undeveloped high-cost oil projects

Click image for larger version of chart

All the fields require at least $95 a barrel for sanction, and some need prices in excess of $150 per barrel. The global Brent oil benchmark has ranged between $99 bbl and $114 bbl over the past 12 months.

Individual company portfolios and exposure to high-risk projects are contained in the individual company factsheets which accompany this summary comparison.

Please, find here the Press Release

Download here the Media Coverage Report 

Testimonials:

Note on required prices

Following the publication of the report, a spokesperson for Cenovus (partners in Foster Creek and Christina Lake), has stated that “its steam-driven projects have supply costs between just $35 and $65 a barrel”. We would be interested to receive more detail from Cenovus on the makeup of these figures to ensure that they are a direct comparison.

To recap and further transparency, the figures quoted in our report include the following distinctions:

  • Quoted figures for individual projects are for currently undeveloped projects only where the project requires a market price of at least $95/bbl for sanction (equivalent to a breakeven of $80/bbl as below). Hence, for example in the case of multi-phase oil sands projects (e.g. Foster Creek), we have only included particular future expansion phases only (i.e. not including phases that are already producing or under development), rather than the average across an asset;
  • The required market prices for oil sands projects include a $15/bbl premium to fully represent transport costs. This is based on a detailed analysis of the costs to get oil sands production to the US Gulf Coast – and achieve WTI. This was completed for our detailed analysis of the KXL pipeline; and
  • As we have looked at undeveloped projects only, we have focused on market prices required for approval rather than break even prices. The quoted market prices required for sanction include a $15/bbl contingency or “risk premium” on top of breakeven figures to represent a margin of safety that might be allowed in order to approve the project. This is consistent with the approach taken in our May report, and follows Rystad’s approach for the Norwegian Government on this issue – see p30

For example, in the case of Foster Creek (being developed by Cenovus and ConocoPhillips), our stated market price required for sanction of $159/bbl represents the $129/bbl break-even price calculated for the as-yet unbuilt Phase J, plus $15/bbl transport premium, plus $15/bbl premium to convert the breakeven price to a price required for sanction.

The documents were amended on 19 August 2014 to further clarify the meaning of “market price required for sanction” as including a $15/bbl contingency on top of the breakeven price, and to include in the summary that the market prices required for the oil sands projects include a $15/bbl premium to account for additional transport costs.

 

Downloads

  • Download the full report here

    Download the full report here

    Download
  • Download the Executive Summary

    Download the Executive Summary

    Download
  • Download Total’s Fact Sheet

    Download Total’s Fact Sheet

    Download
  • Download BP’s Fact Sheet

    Download BP’s Fact Sheet

    Download
  • Download Chevron Corp’s Fact Sheet

    Download Chevron Corp’s Fact Sheet

    Download
  • Download Conoco Phillips’ Fact Sheet

    Download Conoco Phillips’ Fact Sheet

    Download
  • Download Eni’s Fact Sheet

    Download Eni’s Fact Sheet

    Download
  • Download Exxon Mobil’s Fact Sheet

    Download Exxon Mobil’s Fact Sheet

    Download
  • Download Royal Dutch Shell’s Fact Sheet

    Download Royal Dutch Shell’s Fact Sheet

    Download