Bay du Nord: Too Costly for Climate & Shareholders – ACCR Report

Media Release [on Bay du Nord]: For Immediate Release, April 16, 2024.

A new report by the The Australasian Centre for Corporate Responsibility (ACCR), a leading research and shareholder advocacy organization headquartered in Australia, casts doubt on the cost competitiveness of Equinor’s unapproved international oil and gas projects and their climate alignment.

This report is particularly relevant for Equinor’s Bay du Nord project and the taxpayer dollars that could be thrown at the project by the provincial government.

“The report adds to mounting evidence showing that Equinor’s Bay du Nord project, which was analyzed specifically in the report, is neither environmentally friendly nor relatively cheap from a cost competitive standpoint,” says Kassandra Drodge, Newfoundland and Labrador Community Organizer with Sierra Club Canada. “The provincial government is still considering sinking millions in provincial public money into Bay du Nord despite Equinor making billions of dollars in profits. The provincial government continues to use taxpayer money to expand oil and gas projects, while the International Energy Agency makes clear there should be no new oil and gas projects to ensure we can continue to live on a safe planet. A shift away from a continued reliance on oil and gas is possible. This project shows relatively little to no environmental and economic responsibility and locals are given little to no information on a strategic plan or on concurrent EIAs throughout the project’s undetermined lifetime.”

“No matter your views on Bay du Nord, people in Newfoundland and Labrador need to be aware of these risks now, and be prepared for the adaptive changes necessary for a renewable industry in the province. Equinor, as a majority state-owned company, has a responsibility to assess the short term and long term risks of the Bay du Nord project, and Newfoundlander and Labradorians should be aware of all critical aspects before they make decisions on developing energy industries that impact our communities in the process. ”

“This news might be disturbing to political leaders, but these warning signs should also be a wake up call for the provincial government of Newfoundland and Labrador to stop betting on a long term future for oil and gas. No level of deregulation makes these projects worthwhile and paying out public money to wealthy oil companies like Equinor will not result in returns for NL.”

“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,” ACCR’s Executive Director, Brynn O’Brien said.

“On the other hand, halting the approval of pre-FID international oil and gas projects takes the company a lot closer to Paris without impacting long-term shareholder value, which investors really want to see.”

The main findings of the ACCR report are that:

• Compared to the break-even prices of global unapproved oil projects, Equinor’s break-even price for its unapproved projects (including Bay du Nord) does not have a cost advantage.
• Equinor’s oil price assumptions are optimistic relative to the forward Brent curve, as well as peers’ oil price assumptions.
• Equinor’s unapproved oil projects, including Bay du Nord, are not aligned with the Paris Agreement, and sit well outside the top cost-quartile of globally unapproved oil projects.
• Equinor is unlikely to generate positive free cash flow from exploration until the 2050’s.
• Equinor’s international oil and gas investments to date have been capital intensive and are forecast to erode value.

The full ACCR report can be accessed here: https://www.accr.org.au/research/equinor%E2%80%99s-challenge-which-way-to-paris/

Earlier this year Equinor’s stock was downgraded due in part to continued consideration of Bay du Nord. ABG Sundal Collier’s downgrading of the Equinor stock shocked the market, as it represented a 30 percent decrease in the expected price of the Equinor share. A week later, the pessimism proved to be valid, as Equinor’s share had its worst day in almost four years after the release of its financial report for 2023.

More information about the downgrading of Equinor stock can be found here: https://www.sierraclub.ca/investment-bay-du-nord/

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