I’m lead instructor at DirtFish Rally School – second best job in the world. The IPR FPS assumes that policy makers act forcefully to contain the climate threat by 2025 – it is similar to the International Energy Agency’s 2.7✬ central Stated Policies Scenario to 2025, but moves towards alignment with the below 2 degree Sustainable Development Scenario (SDS) over 2025-2040.As we relaunch our ‘how to’ series, get to know DirtFish’s lead instructor Nate Tennis and learn how to perfect the handbrake turn.īefore I jump on in here and start with the tricks, I just wanted to say hello. Other Carbon Tracker research on IPR: The Trillion Dollar Energy Windfall. We provide indicative outcomes for a universe of the largest listed oil and gas producers, showing greatest leverage to demand for oil sands and shale liquids producers. Put simply, investors demand a higher return from higher risk assets. Higher sensitivity means higher risk which means a higher discount rate should be used in valuations. Some oil companies are far more sensitive to oil prices than others. ![]() Despite the rate of decline in oil demand being less than the rate of decline in oil field production, high levels of liquids associated with more resilient gas demand fill in the gap. The FPS implies that virtually no new oil fields are needed post-2030. Many projects fail to deliver a commercial return. Compared to oil fields considered commercial under Rystad Energy’s base case oil assumption and entering production in 2019-2025, illustratively applying the post-IPR maximum price from start-up results in NPVs that are 95% lower than base case. Further, industry sanction decisions and impairment testing are currently often based on higher price assumptions than we model here. History suggests that much less severe market shifts have led to much greater falls in price. Our estimate of price impact may well be conservative. If producers were to plan conservatively in advance of such an outcome this would naturally reduce the impact. Impacts will likely be greatest for projects coming onstream shortly before the IPR. As an illustrative measure, oil assets that enter production in 2019-2025 are modelled as having an aggregate NPV 50% lower if calculated based on a flat oil price from start-up equal to the maximum that results post-IPR, rather than the one we model as prevailing beforehand. Oil projects developed pre-2025 may never generate the value expected at sanction if this policy response is not anticipated. For oil, we model marginal prices as being c.20% lower post-IPR. ![]() Conversely, the sharp shift resulting from delayed, forced action under the FPS results in a significant and rapid fall in oil prices post-2025. The SDS assumes early policy action resulting in a relatively smooth transition, implying fairly stable oil prices and predictable valuations. The Inevitable Policy Response Forecast (IPR) Policy Scenario (FPS) assumes that policy makers act forcefully to contain the climate threat by 2025 – it is similar to the International Energy Agency’s 2.7✬ central Stated Policies Scenario to 2025, but moves towards alignment with the below 2 degree Sustainable Development Scenario (SDS) over 2025-2040.Įarlier policy action makes planning easier, preventing stranding. The IPR has been commissioned by the UN Principles for Responsible Investment (PRI). In this report, we look at the Inevitable Policy Response (IPR), which models the potential impacts of delayed tough policy action by the world’s governments to mitigate climate change, driven by acute societal pressures, extreme weather events and increasingly cost-competitive renewable/low carbon technologies.
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