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.
Major oil companies like BP, Total and Royal Dutch Shell have
progressively lowered their long-term oil price estimates to the
$50-60 a barrel range. But some analysts see even lower levels,
depending on the pace of the energy transition.
In countries where NOCs are based, about 280 million people live
below the poverty line. Funds invested in more challenging oil
projects might be better spent on healthcare, education or
diversifying the economy to reduce inequality, the report said.
"State oil companies' expenditures are a highly uncertain
gamble," said David Manley, NRGI's senior economic analyst and
also co-author of the report.
He said investments might turn a profit but could instead "pave
the way for economic crises across the emerging and developing
world and necessitate future bailouts that cost the public
dearly."
The report said Middle East producers, such as Saudi Arabia,
would be less affected as their break even levels were lower.
But higher cost African and Latin American countries faced
bigger risks, with Mexico's Pemex and Angola's Sonangol already
weighed down by debt.
The push by NOCs to pump more oil was already delivering poor
returns. On average, just one dollar in every four dollars of
revenue is returned to government coffers, the report said.
NRGI pointed to heavy investments by Azerbaijan's SOCAR and
Nigeria's NNPC. It said half of NNPC's investments could turn
into a loss if the global energy transition moved rapidly.
Other countries where investments should be reviewed included
Algeria, China, Russia, India, Mozambique, Venezuela, Colombia
and Suriname, it said.
(Reporting by Julia Payne; Editing by Toby Chopra and Edmund
Blair)
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