Study finds Canadian oil and gas spending at risk under stricter emissions limit

A study by financial think-tank Carbon Tracker says Canadian oil and gas companies rank among some of the most exposed to climate policy risk.

The report is part of an effort to increase disclosure on climate risks in the industry by looking at what projects and spending among 68 publicly listed companies might be jeopardized by a crackdown on emissions.

"We've had a sort of ongoing discussion with investors, and there's a growing desire to understand who the winners and losers might be in the energy transition," said James Leaton, research director at Carbon Tracker.

Using the Paris Agreement goal of limiting global warming to two degrees and scenarios to achieve that put out by the International Energy Agency, Carbon Tracker calculated that about a third of the $4.8 trillion in oil and gas spending planned to 2035 isn't needed if the industry is going to achieve the IEA emission targets.

Under those assumptions, Carbon Tracker ranked the economics of projects using data from research firm Rystad Energy. It found that between 50 and 60 per cent of spending proposed by Imperial Oil, Encana Corp. and Vermilion Energy would fall within the third of spending that's least justifiable. Meanwhile, Suncor Energy and Husky Energy look to have between 40 and 50 per cent of spending at risk.

The companies said they would have to review the report before commenting on it, and pointed to general discussions of risks posed by climate change policies in their regulatory filings.

Husky spokesman Mel Duvall said it was also important to consider the industry's capacity to innovate and reduce greenhouse gas emissions.

Some Canadian companies fared much better, however, with Seven Generations, Tourmaline Oil and Arc Resources found to have no projects threatened under the report's assumptions.

The study's findings come as calls are growing for companies to disclose more data on how they might be exposed to climate change risks.

The Canadian Securities Administrators, which represents the country's provincial and territorial securities regulators, is looking into how companies disclose those risks.

Exxon Mobil shareholders defied the company's recommendation and voted 62 per cent in favour of a resolution earlier this year calling for more information on climate risks.

Suncor put out its first report on climate change risks in April, following a similar shareholder vote last year. The report said new oilsands growth projects are challenged and unlikely to proceed under conditions that most align with the IEA's two-degree scenario.

Nathan Fabian, director of policy and research at Principles for Responsible Investment, which contributed to the study, said the report is a nudge to get more companies to provide information.

"The companies haven't provided enough data, which is why we've gone and done the modelling ourselves," Fabian said. "We're hoping that having published this modelling, that the companies will now be a bit more forthcoming on scenarios they see, and how they might start to reduce their capex on upstream activities."