The UK-based Carbon Tracker Initiative (CTI) has launched a new Capex Tracker to help investors follow the impact of $50- and $60-per-barrel oil on the fossil fuel industry.
The first edition of Capex Tracker shows that major oil and gas companies cut their capex by 10%, or $32 billion, between 2013 and 2015.
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“Oil companies around the world have been slashing development budgets on projects that now don’t make economic sense,” Carbon Tracker explains. “Daily there are reports of deferrals and cancellations. The industry is in some turmoil, as a result of the volatility in oil prices.”
Companies are cutting their capital expenditures “to avoid wasting huge piles of investors’ cash and maintain dividends,” and Carbon Tracker believes high-cost, unconventional oil—including deepwater drilling and tar sands/oil sands projects—will be particularly vulnerable.
With fossil fuel demand likely to shrink due to price competition from renewable energy, and climate targets on track to dictate “a finite level of emissions,” CTI analysts note that “capital could easily be wasted developing new, high-cost projects, which are frequently the most carbon intensive.”