WASHINGTON (Axios): The International Energy Agency’s latest oil market analysis has striking data showing how COVID-19 and global efforts to address climate are forcing huge oil companies to reevaluate their assets.
Driving the news: “The world’s top energy companies slashed the value of their oil and gas assets by a record amount last year as the global health crisis, falling oil prices and a push to slow climate change significantly altered the industry’s view of the future,” IEA notes.
By the numbers: Over the last five quarters, those big companies in the chart you see above “wiped a record $105 billion off their books and announced plans to lay off up to 40,000 workers,” per the report.
IEA notes that companies are focusing on the development of assets in which the economics are competitive in a lower price environment.
“Balance sheets now reflect the lowest portfolio breakevens in two decades and are therefore the most resilient to future commodity price shocks.”
Why it matters: The data on the asset value cuts is more than simply a window onto Big Oil’s accounting exercises, the report notes.
While types of affected assets vary to some extent by company, IEA’s discussion of individual companies — especially European players — shows connective tissue on climate.
For instance, here’s what it said about BP’s $17 billion write-down in asset values…
“The company said it might leave some of its oil and gas in the ground as it expects the pandemic to have a lasting economic impact, leading to fragile energy demand and lower prices.”
“BP expects the economic impact of the virus to help accelerate the world’s shift to a lower carbon economy.”
Yes, but: IEA sees global oil and natural gas demand continuing to rise, and a separate section of the report offers an important note of caution.
“While the efforts to mitigate climate change by individual companies are significant, if they involve withdrawing from investments it remains to be seen whether assets will be picked up by other players to determine the actual impact on supply and emissions,” it states.
