The moves were seen as a possible turning point as plummeting demand makes big oil companies admit they’re not worth what they used to be.
Two of the world’s largest energy companies have sent their strongest signals yet that the coronavirus pandemic may accelerate a global transition away from oil, and that billions of dollars invested in fossil fuel assets could go to waste.
This week, Royal Dutch Shell said it would slash the value of its oil and gas assets by up to $22 billion amid a crash in oil prices. The announcement came two weeks after a similar declaration by BP, saying it would reduce the value of its assets by up to $17.5 billion. Both companies said the accounting moves were a response not only to the coronavirus-driven recession, but also to global efforts to tackle climate change.
Some analysts say the global oil and gas industry is undergoing a fundamental transformation and is finally being forced to reckon with a future of dwindling demand for its products.
“I think we may look back on this as the turning point, the moment the industry finally started to say that real assets with real dollar figures associated with them are likely to be ‘stranded'”—or left undeveloped—”in a decarbonizing world,” said Andrew Logan, senior director of oil and gas at Ceres, a sustainable business advocacy group that has represented major investors in their engagement with oil companies. “This is a huge turnaround from the industry’s previous stance, which had been that no existing assets were likely to be stranded, that there may be risks in the future, but not in the here and now. That acknowledgment, that the risk is real and it’s here in the present, is a really big deal.”