* Oil demand outlook weakens as energy transition gains pace
* A fifth of NOCs $1.9 tln investments might not turn profit
* Oil majors have been cutting long-term oil price outlook
* Higher cost Latin American, African producers most at risk
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By Julia Payne
LONDON, Feb 9 (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 LCOc1 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.
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NRGI risky NOC investments by region https://tmsnrt.rs/2N7amAm
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