Carbon Tracker’s comment on FT editorial article:

Barack Obama should unblock the Keystone pipeline

November 28 2014

Sir,

As your editorial notes (“Barack Obama should unblock the Keystone pipeline”, November 25) if built, Keystone XL will improve the economics of oil sands projects compared to transport alternatives. In doing so, our analysis has shown it will lower the marginal breakeven price for oil sands projects, encouraging new supply from oil sands projects in Alberta to completely fill the pipeline quickly. That means it is carbon positive and will not lead to existing oil being switched from trains. Oil sands projects are indisputably one of the most carbon intensive and polluting energy forms available to us today. By increasing supply from these projects, Keystone XL “significantly exacerbates the problem of carbon pollution” and therefore fails President Obama’s test.

As well as the climate dangers, oil sands projects carry disproportionate risks for investors. Whilst currently producing projects are relatively low-cost, Carbon Tracker research highlights that 9 out of 10 barrels of potential future oil sands production requires an oil price of $95/bbl (Brent-equivalent) for prudent sanction. This year alone, projects have been shelved by Total, Statoil and Shell, and at far higher prices than we see at the moment. As OPEC flex their muscles using their relatively low cost supply, they show willingness to take market share from more expensive projects against a backdrop of weak global growth. Investors will be asking themselves if these are the sort of projects that they want to be exposed to, particularly as the likelihood of governments taking meaningful action on carbon gets ever-greater.

Anthony Hobley

CEO, Carbon Tracker Initiative

Mark Fulton

Research Advisor to Carbon Tracker Initiative

Read the comment on FT Letters here.