{"id":1145232,"date":"2019-10-22T14:16:19","date_gmt":"2019-10-22T19:16:19","guid":{"rendered":"https:\/\/www.mining.com\/?p=1004926"},"modified":"2019-10-22T14:16:19","modified_gmt":"2019-10-22T19:16:19","slug":"analysts-say-divestment-cant-stop-ocean-of-demand-for-oil","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1145232","title":{"rendered":"Analysts say divestment can\u2019t stop ocean of demand for oil"},"content":{"rendered":"<p>At first blush, Norway\u2019s decision to shed billions of dollars worth of oil and gas holdings might sound like a big win for the fossil fuel divestment movement.<\/p>\n<div class='d-flex justify-content-center'>\n<div id='div-gpt-ad-1561499308230-0'><script>googletag.cmd.push(function() {googletag.display('div-gpt-ad-1561499308230-0');});<\/script><\/div>\n<\/div>\n<p>And it might smack of hypocrisy.<\/p>\n<p>After all, Norway\u2019s $1 trillion government pension fund \u2013 the largest in the world \u2013 is also known as the \u201coil fund,\u201d since it was built on oil revenue. Norway is Europe\u2019s second-largest oil producer and exporter, after Russia.<\/p>\n<p>But Norwegian pension funds are now bowing to pressure from the divestment movement and shedding at least some of their oil and gas investments. So are insurance companies.<\/p>\n<p>AXIS Capital Holdings Ltd. (NYSE:AXS) announced last week that it will no longer insure new oilsands projects or pipelines associated with the oilsands.<\/p>\n<figure class=\"wp-block-pullquote alignright\">\n<blockquote>\n<p> Norway\u2019s $1 trillion government pension fund \u2013 the largest in the world \u2013 is also known as the \u201coil fund,\u201d since it was built on oil revenue <\/p>\n<\/blockquote>\n<\/figure>\n<p>Four Canadian oilsands producers have been targeted for divestment by Norway\u2019s KLP pension fund: Suncor Energy (TSX:SU), Cenovus Energy (TSX:CEV), Imperial Oil Ltd. (TSX:IMO) and Husky Energy Inc. (TSX:HSE).<\/p>\n<p>It\u2019s not the full-on divestment that organizations like 350.org have been pushing for, however. The KLP fund is only punting companies that are primarily in oil and gas exploration and production, especially in the area of oilsands.<\/p>\n<p>Norway\u2019s government pension fund and the KLP fund will keep their investments in integrated majors like Exxon Mobil Corp. (NYSE:XOM) and Royal Dutch Shell and, of course, Norway\u2019s own Equinor ASA (Statoil). The KLP fund also still contains a number of Canadian oil and gas producers.<\/p>\n<p>To date, most institutional investors \u2013 big banks, pension funds, university endowments \u2013 have rejected or deferred divestment proposals, and often cite fiduciary duty to their clients. After all, divesting from a profitable sector like oil and gas could hurt pensioners and universities more than oil companies.<\/p>\n<p>There are also serious questions about whether divestment will actually have any serious impact on greenhouse gas emissions. Microsoft founder Bill Gates \u2013 who has invested heavily in sustainability \u2013 doesn\u2019t seem to think it will.<\/p>\n<p>\u201cDivestment, to date, probably has reduced about zero tonnes of emissions,\u201d he recently told the&nbsp;<em>Financial Times<\/em>.<\/p>\n<p>For every pension fund or university endowment that sells off its oil and gas stocks and bonds, some less virtuous fund manager will see a potential bargain and snap them up. As long as there is a demand for oil, there will be profits to be made from it, and some investor somewhere will put money into it.<\/p>\n<p>The $75 million in Cenovus shares that Norway\u2019s KLP pension is selling represents only 0.66% of the company\u2019s total market cap, something that could be made up in a single day of trading.<\/p>\n<p>\u201cThe decision by KLP pension fund to divest its shares in our company will have minimal impact on us,\u201d Grady Semmens, a spokesperson for Cenovus, told&nbsp;<em>Business in Vancouver<\/em>&nbsp;in an email.<\/p>\n<p>It could become a problem, however, if the divestment movement gains serious momentum. The oil and gas sector in the U.S. and Canada has already seen a decline in investment capital in the last few years, said Jackie Forrest, senior director at ARC Energy Research Institute.<\/p>\n<p>\u201cI think the concern is that there are limited sources of capital, and as more groups divest of the oil and gas industry, or certain companies, it just makes capital more scarce and hard to get,\u201d she said. \u201cSo, yeah there\u2019s a concern for sure.\u201d<\/p>\n<p>Wal van Lierop, founder of Chrysalix Venture Capital, thinks the divestment movement could pose a real threat to the Canadian oil industry, especially if interest rates ever go up. The issue with Alberta\u2019s oilsands isn\u2019t just its carbon intensity \u2013 it\u2019s also its high costs.<\/p>\n<p>Right now, low interest rates mean it is still relatively easy to finance projects, he said. But a combination of high interest rates and divestment could begin to put a serious squeeze on the Canadian oil and gas industry.<\/p>\n<p>\u201cI think it [divestment] will have a significant impact in Canada,\u201d he said.<\/p>\n<p>He points out the industry itself has made its own divestments, with majors like Royal Dutch Shell and ConocoPhillips (NYSE:COP) selling off their Alberta oilsands assets.<\/p>\n<p>\u201cIsn\u2019t it a canary in the coal mine that most of the internationals have, in the meantime, left?\u201d<\/p>\n<p>Van Lierop added there is a danger that natural gas and liquefied natural gas \u2013 something he thinks is a necessary bridge to decarbonization \u2013 could get also caught up in the divestment movement.<\/p>\n<p>Even if it works, however, the divestment movement might have a leakage problem. Divestment could indeed end up starving some oil producers of capital in North America and Europe, but that won\u2019t necessarily dry up the world\u2019s thirst for oil.<\/p>\n<p>Stated-owned oil companies in Saudi Arabia, Russia, China and Iran that don\u2019t rely on public markets for capital might benefit at the expense of producers in North America and Europe.<\/p>\n<p>\u201cIn our view, all it will do is shift more supply to come from other places in the world, like the Middle East or Russia,\u201d Forrest said. \u201cThe environmental effects of that oil may not be any better, or may be even worse.\u201d<\/p>\n<p>It may be that engagement, not disengagement, is a more effective tool for getting the companies with the biggest carbon footprints to voluntarily shrink those footprints.<\/p>\n<p>Climate Action 100 is one example. Led by institutional investors, it engages with some of the world\u2019s biggest companies to adopt corporate climate action plans.<\/p>\n<p>To date, three oil majors \u2013 BP Plc, Royal Dutch Shell and Equinor ASA\u2013 and one mining major \u2013 Glencore Plc \u2013 have signed agreements to voluntarily reduce their carbon footprints. Shell, for example, has committed to cutting its carbon footprint by 20% by 2025, and 50% by 2050.<\/p>\n<p><em>(This article first appeared in <a href=\"https:\/\/biv.com\/\"  rel=\"noreferrer noopener\" aria-label=\"Business in Vancouver (opens in a new tab)\">Business in Vancouver<\/a>)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Some pension funds are now bowing to pressure from the divestment movement and shedding at least some of their oil and gas investments. So are insurance companies.<\/p>\n","protected":false},"author":47,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[2648,624,1035,369],"tags":[],"class_list":["post-1145232","post","type-post","status-publish","format-standard","hentry","category-careers","category-education","category-energy","category-miningcom"],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1145232","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1145232"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1145232\/revisions"}],"predecessor-version":[{"id":1145233,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1145232\/revisions\/1145233"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1145232"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1145232"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1145232"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}