OPEC, Russia seen gaining more power with Shell Dutch ruling
08:00 (01/06) - Bron: Reuters
* National oil firms seen expanding market share
* Oil demand still growing strongly in Asia
* Large fund manager warns of higher oil prices
By Dmitry Zhdannikov
LONDON, June 1 (Reuters) - Climate activists who scored big
against Western majors last week had some unlikely cheerleaders
in the oil capitals of Saudi Arabia, Abu Dhabi and Russia.
Defeats in the courtroom and boardroom mean Royal Dutch
Shell , ExxonMobil and Chevron are all
under pressure to cut carbon emissions faster. That’s good news
for the likes of Saudi Arabia’s national oil company Saudi
Aramco , Abu Dhabi National Oil Company and Russia's
Gazprom and Rosneft .
It means more business for them and the Saudi-led
Organization of the Petroleum Exporting Countries (OPEC).
"Oil and gas demand is far from peaking and supplies will be
needed, but international oil companies will not be allowed to
invest in this environment, meaning national oil companies have
to step in," said Amrita Sen from Energy Aspects consultancy.
Climate activists scored a major victory with a Dutch court
ruling requiring Royal Dutch Shell to drastically cut emissions,
which in effect means cutting oil and gas output. The company
will appeal.
The same day, the top two U.S. oil companies, Exxon Mobil
Corp and Chevron Corp (CVX.N), both lost battles with
shareholders who accused them of dragging their feet on climate
change.
"It looks like the West will have to rely more on what it
calls "hostile regimes" for its supply," joked a high-level
executive from Russia's Gazprom oil and gas group, referring to
energy companies around the world owned completely or mostly by
the state.
Saudi Aramco, Adnoc and Gazprom all declined to comment. Oil
major Rosneft, in which the Russian state has the biggest stake,
also declined to comment.
A senior Saudi Aramco staffer said the court ruling would
make it easier for OPEC to ramp up production.
"It is great for Aramco," the staffer said.
Western oil majors like Shell have dramatically expanded in
the last 50 years, as the West sought to cut its reliance on
energy from the volatile Middle East, and from Russia.
Those same Western energy majors, including BP and Total,
have set out plans to sharply reduce emissions by 2050. But they
face growing pressure from investors to do more to meet
U.N.-backed targets to limit global warming.
Saudi Aramco, listed on the Saudi bourse but majority state
owned, is not under the same sort of pressure to cut its carbon
emissions, although the kingdom's rulers aim to sharply increase
the country's use of renewables.
Gazprom expects demand for natural gas to grow in the coming
decades and for it to play a bigger role in energy consumption
than renewable sources and hydrogen.
Western oil majors control around 15% of global output,
while OPEC and Russia have a share of around 40 percent. That
share has been relatively stable in the last decades as rising
demand was met with new producers like smaller private U.S.
shale firms, which today face similar climate-related pressures.
PEAK DIVIDENDS
Since 1990, global oil consumption has grown to 100 million
barrels per day from 65 million bpd, with Asia providing the
lion's share of growth.
Countries such as China and India have made no pledges to
reduce oil consumption, which on a per capita basis is still a
fraction of the levels in the West. China will rely heavily on
gas to cut its huge coal consumption.
The International Energy Agency, which looks after energy
policies of the West, issued a stark appeal last month to the
world to essentially scrap all new oil and gas developments. But
it gave no clear formula on how to reduce demand.
Despite pressure from activists, investors and banks to cut
emissions, Western oil majors are also tasked with maintaining
high dividends amid heavy debt. Dividends from oil companies
represent significant contributions to pension funds.
"It is vital that the global oil industry aligns its
production to the Paris goals. But that must be done in step
with policy, changes to the demand side, and the rebuilding of
the world’s energy system," said Nick Stansbury from Legal &
General, which manage £1.3 trillion ($1.8 trillion) in assets on
behalf of savers, retirees and institutions.
"Forcing one company to do so in the courts may (if it is
effective at all) only result in higher prices and foregone
profits," he said. Legal & General, one of the world's largest
fund managers, holds assets in most oil majors.
Climate lawsuits have been filed in 52 countries in the past
two decades, with 90% of those in the United States and European
Union, risk consultancy Verisk Maplecroft said.
"In the West, energy investments will peak on fears and
concerns over regulations and court rulings. Then, we will see
peak dividends," said the Aramco executive. Aramco pays the
highest annual dividend of $75 billion.
Over the past five years, the IEA has been predicting a
large oil shortage and an oil price spike due to a lack of
investments following a 2014-2017 oil price crash.
An oil price rally coupled with the declining strength of
oil majors would mean a large wealth transfer from the West to
countries like Russia and Saudi Arabia, until demand starts
declining not only in the West but in Asia too.
"The same oil and gas will still 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 measurements.
(Additional reporting by Alex Lawler, Ron Bousso, Noah Browning
in London, writing by Dmitry Zhdannikov; Editing by William
Maclean)
((Dmitri.Zhdannikov@thomsonreuters.com;))