State oil firms risk wasting $400 bln as energy transition speeds up

By Julia Payne
LONDON, Feb 9 (Reuters) - National oil companies (NOCs) risk
squandering $400 billion on expensive oil and gas projects over
the next decade that may only break even if the world fails to
meet the Paris climate goals, a non-governmental organisation
said on Tuesday.
In a new report called Risky Bet, the Natural Resource
Governance Institute (NRGI) estimated that NOCs could invest
$1.9 trillion over the next ten years, meaning one-fifth of
those investments would be unviable unless the oil price stayed
above $40 a barrel.
Major oil companies like BP, Total and Royal Dutch Shell
have already progressively lowered their long term price
estimates, now in the $50-60 a barrel range, while some analysts
see even lower levels depending on the energy transition
scenario.
The result could worsen inequalities as funds that could
have been better spent on healthcare, education or diversifying
the economy might instead create an economic crisis. Many of
these NOCs are based in countries where 280 million people live
below the poverty line.
"State oil companies' expenditures are a highly uncertain
gamble," David Manley, senior economic analyst at NRGI and
report co-author, said.
“They could pay off, or they could pave the way for economic
crises across the emerging and developing world and necessitate
future bailouts that cost the public dearly.”
The report said that producers in the Middle East, such as
Saudi Arabia, would be less impacted as their break even levels
were much lower but African and Latin American countries would
have more trouble.
A heavy debt burden is already an issue for Mexico's Pemex
as well as Angola's Sonangol. Compounding the issue is the
longheld expansionist view at many NOCs, along with a lack of
transparency. On average, just one dollar in every four dollars
of revenue is returned to government coffers, the report said.
Azerbaijan's SOCAR and Nigeria's NNPC were of particular
concern, according to NRGI. About half of NNPC's investments in
upcoming oil projects may turn into a loss if the global energy
transition moves rapidly. Other countries where investments
should be reviewed include Algeria, China, Russia, India,
Mozambique, Venezuela, Colombia and Suriname.

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NRGI risky NOC investments by region https://tmsnrt.rs/2N7amAm
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