New research: moving out of international waters sets Equinor on path towards Paris

The Australasian Centre for Corporate Responsibility​ (ACCR) has today released research showing that if Equinor ASA stops exploring for new oil and gas reserves, and halts new projects outside of Norway , it can take material steps towards Paris alignment without diluting shareholder value.

Equinor is under increasing pressure to go further on transitioning its business, with its majority owner, the Norwegian government, asking the company to reduce emissions in line with the Paris Agreement.

The research, “Equinor’s challenge: which way to Paris?”, examines the company’s oil and gas exploration activities, which Equinor says are needed to support the energy transition. It finds that while exploration outcomes are inherently uncertain, Equinor’s oil and gas exploration is unlikely to generate positive free cash flow until the 2050s. This is too late to reinvest in the energy transition, so further exploration will hinder, rather than support a timely transition.

Analysis of Equinor’s international oil and gas production - to date in 16 countries outside of Norway - shows that it has not generated adequate value, despite being allocated large amounts of capital:

• with US$94 billion of capex (nominal) on top of ~US$14.5 billion in net acquisition and pre-FID costs (nominal), international projects are expected to deliver a negative net present value (NPV) return of -US$3.6 billion.
• with an optimistic oil price assumption and a higher average break-even price than the global market, Equinor’s unapproved projects may not be as valuable as it predicts. ACCR analysis found that lowering Equinor’s oil price assumption to the forward Brent price is forecast to slash the NPV of Equinor’s pre-FID international projects by 50%.
• None of the major unapproved oil and gas projects Equinor is seeking to develop outside of Norway are Paris-aligned, nor are they relatively low-cost compared to all other unapproved oil and gas projects globally.
• Equinor’s international projects represent 67% of the 1.3Gt CO2e of cumulative emissions from its total unapproved projects, meaning halting them would make a material step towards Paris alignment.

Brynn O’Brien, Executive Director at the Australasian Centre for Corporate Responsibility (ACCR) said:

“This research shows that Equinor has a huge opportunity to make material steps towards Paris alignment in a way that makes commercial sense for shareholders.

“We expect this research will be highly relevant to the Norwegian government, which has made it clear as the majority shareholder that it expects Equinor to set targets and implement measures to achieve Paris alignment.

“We also expect this research to generate interest among the Norwegian public, who as the ultimate beneficiaries of the government's majority shareholding, will want to see prudent investment decisions by Equinor.

“Our analysis finds no evidence to support Equinor’s claims that ongoing oil and gas exploration  will support the energy transition. To the contrary, exploration reduces Equinor’s access to capital for the energy transition in the crucial next two decades, and increases the risk of fossil fuel lock-in post 2050.

“None of the major unapproved oil and gas projects Equinor is seeking to develop outside of the Norwegian Continental Shelf are Paris-aligned, nor are they relatively low-cost compared to all other unapproved oil and gas projects globally.

“For investors concerned about capital allocation in the energy transition, this is important research to consider. Equinor’s international production is high emissions, high risk, and there is no certainty it will create value. On the other hand, halting international oil and gas projects takes the company a lot closer to Paris without impacting long-term value, which investors really want to see.”