Oil giants raise concerns Paris climate pact will lead to tougher rules, laws and penalties on fossil fuel industry – but predict demand for oil and gas will soar
By Ed King
BP and Shell say the newly agreed Paris climate pact will likely lead to additional regulations and costs to the oil and gas industry.
Both hydrocarbon giants assert their products will be in high demand until mid-century, but warn new green policies could impact future growth and revenue streams.
“Changes in laws, regulations and obligations relating to climate change could result in substantial capital expenditure, taxes and reduced profitability,” says BP’s report.
“Rising climate change concerns have led and could lead to additional legal and/or regulatory measures which could result in project delays or cancellations,” says Shell’s ‘risk factors’ analysis.
“If our GHG emissions rise alongside our ambitions to increase the scale of our business, our regulatory burden will increase proportionally,” it adds later.
“If we are unable to find economically viable, as well as publicly acceptable, solutions that reduce our GHG emissions and/or GHG intensity for new and existing projects or products, we could experience additional costs or financial penalties, delayed or cancelled projects, and/or reduced production and reduced demand for hydrocarbons, which could have a material adverse effect on our operational performance, earnings, cash flows and financial condition,” – Shell 2015 Annual Report
The oil majors have long predicted climate regulations could impact their business models, but BP notes an “increased focus on climate change” through 2015.
The board says it was “pleased to support a resolution brought by a group of our shareholders that encouraged greater disclosure of our work in this area.”
Shell urges governments to offer a clearer policy framework in the form of a global carbon price, which it contends will aid the transition to lower carbon energy sources.
Without state leadership and support in the development of new polices and carbon capture technologies, the business could suffer, it says.
Scientists say 80% of the world’s known fossil fuels need to be kept in the ground if the world is to avoid warming beyond the 2C danger zone.
The 2015 Paris deal included an aspirational goal to limit warming to 1.5C above pre industrial levels, which some experts say means no unabated burning of oil, gas and coal beyond 2030.