HSBC: BP, Shell, Statoil at risk from 'unburnable' reserves

Oil and gas majors, including, BP, Shell and Statoil, could face a loss in market value of up to 60 percent should the international community stick to its agreed emission reduction targets, analysts at HSBC have warned.

A new report from the banking giant finds that 17 percent of Norwegian company Statoil's reserves would become "unburnable" in a world where oil and gas use falls as countries seek to keep carbon concentrations in the atmosphere to 450 parts per million (ppm), the level the International Energy Agency (IEA) estimates is necessary to deliver a 50 percent chance of limiting long-term temperature rises to 2°C.

Governments around the world have repeatedly committed themselves to ensuring average temperatures do not rise above 2° C, the level at which scientists warns atmospheric feedback loops could trigger "dangerous" climate change. 

Under its 2° C scenario, the IEA calculates around 1,440 gigatons (Gt) of carbon can be emitted over the first half of this century in order to meet the 450ppm target. Emissions have already reached 400 Gt, which leaves around 1,000 Gt -- or a third of current proven reserves -- can be burnt.

While Statoil is the worst affected of the oil majors assessed by HSBC, the bank also calculates around 6 percent of BP's reserves are at risk, along with 5 percent of Total's, and 2 percent of Shell's. U.K. company BG Group has almost no reserves at risk, the report finds.

However, HSBC believes a bigger risk to the sector's value comes in the shape of reduced demand potentially leading to lower oil and gas prices, whereupon the potential value at risk for leading fossil fuel firms could rise to between 40 percent and 60 percent of current market capitalization. BP's market capitalization currently stands at around $141.82 billion, compared to Shell's $231.64 billion, Statoil's $83.52 billion and BG Group's $61.46 billion.

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