7 November 2019
Oil and gas producer and explorer Central Petroleum was today challenged over its token efforts to understand and respond to climate change risks.
Central Petroleum listed climate change, and particularly potential carbon pricing, as a principal risk in its 2019 annual report.
However, at today’s annual general meeting, Chair Wrixon Gasteen was unable to say at what carbon price Central’s assets would become unviable. The best he could offer was that the company’s climate risk assessment had gone so far as to conclude: “it may have an impact on us in the future, but right now, no.”
This token climate risk assessment falls well short of regulator and investor expectations, who are demanding information that allows climate risks to be priced into asset and company valuations.
A common theme to today’s meeting was Central’s repeated reference to gas being a transition fuel that is helping to reduce emissions. However, the IPCC’s 2018 report shows gas use for primary energy must fall globally by 25% by 2030 (from a 2010 baseline), with oil’s role in primary energy falling 37% over the same time frame.
It’s unsurprising then that shareholders at today’s meeting wanted to know more about how the company sees gas demand changing in the future, and whether those views had been stress tested against a scenario in which the climate goals of the Paris Agreement are met.
In response, Gasteen’s said “We are confident that during the period that we are going to be operating, we’re going to be OK,” but then went on to say “How many years have we got? I don’t know.”
If Central were to properly stress test its expansion plans against a 1.5°C warming scenario, the answer to that question may dent the company’s confidence!
How many years have we got? I don’t know.Wrixon Gasteen, Chairman Central Petroleum
A further sign of climate change transition risks facing Central is the shift within the financial sector away from fossil fuels. For example, Commonwealth Bank in 2019 instituted a policy to not finance new oil and gas projects that are inconsistent with the climate goals of the Paris Agreement.
When asked whether the company is concerned about this shift, Central said it currently had no problems with access to finance or insurance, and that while Commonwealth Bank’s policy may be part of growing trend, “for now, we don’t deal with the Commonwealth Bank.”
This attitude of ‘it’s not a problem now, so let’s not worry about it’ was concerningly common throughout Central’s responses to shareholder questions at today’s meeting.
Global Witness has warned “Any production from new oil and gas fields, beyond those already in production or development, is incompatible with limiting warming to 1.5°C” and “All of the $4.9 trillion forecast capex in new oil and gas fields is incompatible with limiting warming to 1.5°C.”
For a company that plans to develop new oil and gas fields, Central Petroleum doesn’t appear to have a handle on exactly what a Paris-aligned energy transition means for their business, nor do they seem to care.