Greenify #82: Oil & Gas Shaking Up The World
October 13, 2023
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📌 Fact of the week
According to Reuters, the coal industry is at risk of losing 1 million jobs by 2050, even without any further pledges to phase out fossil fuels. ☠️
Hottest news of the week…
Regulation 🗃 – Malaysia revisiting its green ambitions
What happened: Malaysia’s Parliament on Wednesday passed a law that will require the country’s biggest energy consumers to implement power-saving measures. Malaysia targets to reduce its emissions by 45% between now and 2030, and expects the “Energy Efficiency and Conservation Act” to save 2,017 million gigajoules of energy use. This measure will apply to about 1,500 industrial energy consumers and around 500 commercial consumers. 🔢
Zoom out: In a period where major developed countries like the UK seem to be backtracking on their climate ambitions, it is encouraging to see developing countries such as Malaysia upping their ambitions on climate. Although the starting point is very different, as Malaysia has probably got several “easy fixes” available to improve the status quo, law enforcement on the topic is a synonym of ambition. 👍
Business 💰 – BP, no news is good news
What happened: BP’s interim CEO, Murray Auchincloss, told investors earlier this week BP is still committed to its climate and financial targets. Despite no new announcements were made, this was a relief, as BP has not been a good example lately. In February, the company had recalibrated its forecasts on oil and gas output reduction; the company now aims to reduce output by 25% by 2030 compared to 2019 levels vs a 40% output reduction previously targeted. 📉
Zoom out: This has been an hectic week in the Oil & Gas industry. While ExxonMobil was announcing its biggest ever acquisition and increasing its oil assets (discussed below), BP was reassuring investors about its commitment to net-zero and renewables. However, looking into BP’s investment plans, one wonders whether net'-zero is a realistic objective: by 2030, the company still expects the largest spending in its business to be on oil and gas, at c.$10 billion per year.💸
Innovation 💡 - Tokyo and carbon credits, here we go
What happened: Tokyo’s stock exchange started trading carbon credits this Wednesday, in an effort to improve liquidity and transparency in this opaque market with the ultimate goal of supporting the country’s net zero ambitions. For context, Japan is the 5th largest CO2 emitter globally. The traded carbon credits, officially named J-Credits, are certified by the government based on the estimated CO2 reduction/removal through activities such as renewable energy production and forest management. 🌲
Zoom out: Putting a price on carbon is a mechanism thought to incentivize carbon emitters to “green” their production processes in order to avoid to incur in paying carbon costs. Today, carbon pricing only exists in specific countries, and by definition, these countries have made the most progress in decarbonizing. In Japan’s case, the possibility to buy/sell carbon credits on a public exchange will favour the rise of a new market and make it easier for companies to buy/sell and achieve their net-zero goals. Is this the right way to become green? That’s a more complex debate.🙄
Deep dives of the week…
Chart of the week - Texas’ relevance in the Oil & Gas industry 🥇
Given ExxonMobil’s huge acquisition, which we discuss below, we though it would make sense to mention the size and hence the importance of Texas’ oil production. According to data from the Energy Information Administration, as of 2017 only six countries produced more barrels/day than Texas. Perhaps other countries have now overtaken Texas, but the state’s influence when it comes to oil production cannot be discounted.⛔
Source: Energy Information Administration
Deal of the week - Big moves in Oil & Gas 🛢️
Oil giant ExxonMobil has agreed to acquire Pioneer Natural Resources in a deal worth about $60 billion. This is the largest acquisition ExxonMobil has carried out since the company’s existence in 1999, when Exxon and Mobil were merged. This acquisition will enable Exxon to further control oil and gas supply in the Permian Basin, a vast field between western Texas and New Mexico. Despite this deal may be beneficial for both companies in the medium-term, we wonder how well it fits withing the bigger context of the world’s ambitions to cut oil and gas production. ❓
👋 See you next Friday, for the best sum up of this coming week!
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