It seems like the Majors (and some of their NOC friends) are aligned in appealing for a Carbon Tax, specifically a tax on carbon emissions from oil & gas operations.
The cynics amongst you might question the motives of the folk appealing for this – does it ‘knife' a significant number of competitors for example* - but I prefer to see it as a quest for some sort of certainty as the low-carbon world approaches.
It seems like $50 - $100 per tonne on a CO2-equivalent basis is the range contemplated. It's worth working through the arithmetic to see what this means, using a couple of companies as examples:
First of all, they are to be congratulated on the extent to which they report, the assurance they reveal. Things changed for them in 2016 due to the BG takeover so it's best to look at 2015.
With respect to GHG emissions from operated facilities, they reported 72 million tonnes on a CO2 equivalent basis, with total production of 2,954 thousand boepd, giving a total of 1.078 billion boe for the year. OK, this is for a mix of operated and non-operated but bear with me……
On that basis, a Carbon Tax of $50 per tonne would lead to a total charge of $3.6 billion, or just over $3.3 per boe.
Slightly more opaque reporting than Shell but the relevant information can be found in the CSR part of the Annual Report for 2015.
With respect to GHG emissions from operated facilities, they reported 822 thousand tonnes on a CO2 equivalent basis, with total production of 57.6 thousand boepd, giving a total of a thad over 21 million boe for the year. OK, this is again for a mix of operated and non-operated but bear with me again……
On that basis, a Carbon Tax of $50 per tonne would lead to a total charge of $41 million, or slightly less than $2 per boe.
You can take two different views of these numbers I guess.
If you look at the per boe numbers, and I'm guessing $2 - $4 per boe would cover it for most companies, then the oil price swings by this amount every month, or so it seems, so why worry?
On the other hand, if Shell and Premier could completely mitigate their GHG emissions (yes, I know how tough that is to do!), then $3.6 billion and $41m per annum would flow to their respective bottom lines. And these sums give them an incentive to invest a proportion of them in such mitigation, especially if they can do it collaboratively through such as the OGCI. Indeed, these numbers give some context to the $100m that companies such as BP, Shell, Statoil, Total, ENI are each going to invest in the OGCI.
*Mind you, it does threaten those lesser companies who do not reduce their emissions!!
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