Mon, Nov 28, 2016 page14

• Shell sees no hit from Paris accord

  BULLISH: Shell’s CEO was skeptical that revaluation of reserves could trigger a financial shock, saying that the industry had shown itself able to weather worse jolts

  • Reuters, AMSTERDAM and TORONTO
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  Royal Dutch Shell PLC expects to pump out all the fossil fuel reserves listed on its balance sheet, its chief executive officer said, dismissing concerns that production limits in the wake of the Paris climate accord could hit the energy giant’s valuation.

  In an interview with Dutch newspaper Het Financieele Dagblad, Ben van Beurden said the issue of “stranded” reserves — deposits in the ground that cannot be used because of carbon emissions limitations — would have no impact on balance sheets.

  “The company is valued on producable reserves that we can produce in the next 12 or 13 years,” he said. “We should certainly be able to produce those under any climate outcome. Even if global temperatures can only rise by 2°C.”

  The Paris Climate Agreement, which came into force this month, commits almost 200 countries, including China, the US and the EU, to limiting temperature increases to 2°C and weaning the world economy off fossil fuels.

  The Anglo-Dutch energy giant, the world’s third-largest by market capitalization, has bet heavily on a lower-carbon future, with investments in wind and renewables capped by the US$50 billion acquisition of British Gas Ltd in February.

  Van Beurden was also skeptical that revaluation of reserves after the climate deal could trigger a financial shock, saying that the crude oil price’s collapse from US$120 to US$30 a barrel showed the industry’s ability to weather much larger shocks.

  “Each US$10 fall costs us US$5 billion in cash a year,” he said. “The fact that over the coming few decades we are transitioning, in a more or less ordered way, to a low-carbon society is less draconian than what we’ve seen over the past two years.”

  He also told the newspaper that there would be no changes to Shell’s dividend policy, even though payouts at the current level outstripped the company’s cash flow.

  “[Shareholders] want a stable dividend. We must be seen as reliable,” he said.

  Even with crude oil at US$47 per barrel, the company could make adequate investments with current dividend levels, he said, adding that only a slight increase in demand could send prices up again, since even at the peak of US shale production, there was only a 2 percent global surplus.

  In related news, Canada will require reduced carbon footprints for all fuels so that the country can achieve a 30 megaton cut in greenhouse gas emissions by 2030, Environment and Climate Change Canada said on Friday.

  The government will not mandate specific changes to fuels and will focus just on reducing their emissions, officials said after a government announcement in Toronto.

  Precise steps are to be determined after consultations, including with Canada’s provinces and relevant industries, and the government is to release a discussion paper in February next year, according to the environment department.

  Canada’s Liberal government ran on a platform to do more for the environment. The country’s new fuel measures would help it meet the emissions reduction targets of the Paris agreement on climate change, which Canada’s parliament ratified last month.

  The government’s new measures, the “Clean Fuel Standard,” will aim to reduce fuels’ carbon intensity, a measure of emissions relative to the amount of energy derived, according to the department.

  On Monday, Canada announced that it plans to virtually eliminate the use of traditional coal-fired electricity by 2030.

  However, data show Canada has little chance of meeting its climate change goals of reducing emissions by 30 percent from 2005 levels by 2030, in part because of booming emissions from the energy sector.
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