State oil firms risk wasting $400 billion as energy shift speeds up | Reuters

State oil firms risk wasting $400 billion as energy shift speeds up | Reuters

State-owned oil companies could squander about $400 billion on investments in the next decade on new oil projects that will struggle to turn a profit as the world shifts away from fossil fuels, a non-governmental organisation said on Tuesday.

The Natural Resource Governance Institute (NRGI) estimated national oil companies, or NOCs, would invest $1.9 trillion in the next 10 years with about a fifth of those investments only breaking even if oil prices stay above $40 a barrel.

Oil prices have climbed to around $60 this week, after plunging below $20 last year when demand plummeted due to the coronavirus crisis. But the long-term outlook is weakening, as more analysts and energy firms see peak oil demand being reached sooner than the previous forecasts of the early 2030s.

“A huge amount of state investments in oil projects will likely only yield returns if global oil consumption is so high that the world exceeds its carbon emission targets,” Patrick Heller, who co-authored NRGI’s Risky Bet report, said in reference to goals set out in the 2015 Paris climate agreement.