Tracking the Transition of the Energy Sector With Summary Views on Portfolio Divestment of Oil & Gas Discussion Slides for the University of Victoria November 2019 Confidential Not for Distribution
Tracking the Transition of the Energy Sector
With Summary Views on Portfolio Divestment of Oil & Gas
Discussion Slides for the University of Victoria
November 2019Confidential
Not for Distribution
The content of this document is the property of ARC Financial Corp. (“ARC”) and may not be reproduced, republished, posted, transmitted, distributed,
copied, publicly displayed, modified or otherwise used in whole or in part without the express written consent of ARC.
Certain information contained herein constitutes forward-looking information and statements and financial outlooks (collectively, “forward looking
statements”) under the meaning of applicable securities laws. Forward looking statements include estimates, plans, expectations, opinions, forecasts,
projections, guidance or other statements that are not statements of fact. Although ARC believes that the assumptions underlying, and expectations
reflected in, such forward looking statements are reasonable, it can give no assurance that such assumptions and expectations will prove to have been
correct. Such statements involve known and unknown risks, uncertainties and other factors outside of ARC’s control that may cause actual results to differ
materially from those expressed in the forward looking statements.
Performance histories are not indicative of future performance. Investment returns will fluctuate and are not guaranteed.
This document is provided for informational purposes only and shall not constitute an offer to sell or the solicitation of an offer to buy securities. None of
the information contained herein is intended to provide investment, financial, legal, accounting or tax advice and should not be relied upon in any regard.
In connection with the preparation of this information, ARC may have relied upon data provided by external parties. ARC does not audit or otherwise verify
such data and disclaims any and all responsibility or liability of any nature whatsoever for the accuracy, adequacy or completeness of the data upon which
ARC has so relied.
This document has been published on the basis that ARC shall not be responsible for, and ARC expressly disclaims any responsibility for, any financial or
other losses or damages of any nature whatsoever arising from or otherwise relating to any use of this document.
Restrictions and Disclaimer
2 | ARC Energy Research Institute
Tracking the Transition1
0
50
100
150
200
Coal Oil Natural Gas Nuclear Hydro Renewables
Ex
ajo
ule
s
World Energy Demand by Primary SourceAnnual; 2000 to 2018
4 | ARC Energy Research InstituteSource: BP Statistical Review
Oil Gas
Growth in Renewable Energy is Exponential
Source: BP Statistical Review 5 | ARC Energy Research Institute
0
5
10
15
20
25
2000 2005 2010 2015
Ex
ajo
ule
s
World Renewables
Consumption
World Energy Demand By Primary SourceAnnual; 1970 to 2018
6 | ARC Energy Research Institute
Renewables
Natural Gas
Nuclear
Coal
Oil
Hydro
Source: BP Statistical Review
0
100
200
300
400
500
600
1970 1980 1990 2000 2010
Ex
ajo
ule
s…but this
fraction is still
very small.
0%
10%
20%
30%
40%
50%
60%
70%
2000 2005 2010 2015
Ma
rke
t S
ha
re
Market Share of Renewables, Oil and GasAs a percentage of the total of all primary energy sources
Source: BP Statistical Review 7 | ARC Energy Research Institute
Oil + Natural Gas
57%
Renewables
4%
Global GHG Emissions GrowthAnnual; 2000 to 2018
Source: BP Statistical Review 8 | ARC Energy Research Institute
China
CanadaUSA
India
Europe
Rest of
World
0
5
10
15
20
25
30
35
2000 2005 2010 2015
To
nn
es
of
CO
2 (
Bln
s)
Financial
CrisisRise of
China
Economic
recovery
Cheap
energy era
Strictly Confidential
Big Picture GHG Emissions From Oil
Source: International Energy Agency 68 | ARC Energy Research Institute
Extraction Combustion
2017
2040 IEA Sustainable
Scenario
Coal Other
Source: International Energy Agency 9 | ARC Energy Research Institute
Gas power
generationCombustion
2017
2040IEA Sustainable
Scenario
Coal Other
Source: IEA Sustainable Development Scenario (World Energy Outlook 2018)
Sources of Global GHG Emissions, 2017 and 2040Oil & gas
extraction
This is how much emissions
must shrink by 2040
World Investment in Renewable EnergyAnnual; 2000 to 2018
Source: IEA
0
1
2
3
4
5
0
100
200
300
400
500
2000 2005 2010 2015
$U
S (
Tri
llio
ns)
$U
S (
Billio
ns)
10 | ARC Energy Research Institute
Cumulative Investment in Renewable EnergyAnnual Global Captial Expenditures; 2000 to 2018
Source: International Energy Agency (2018)
0
1
2
3
4
5
0
100
200
300
400
500
2000 2005 2010 2015
$U
S (
Tri
llio
ns)
$U
S (
Billio
ns)
Cumulative
CAPEX
11 | ARC Energy Research Institute
0
200
400
600
800
1970 1990 2010 2030
Ex
ajo
ule
s
Coal
Oil
Natural Gas
NuclearHydroRenewables
Typical Paris Agreement Transition ScenarioAnnual; 1970 to 2040
Source: BP Statistical Review (1970-2017), IEA (2018 to 2040) 12 | ARC Energy Research Institute
0
200
400
600
800
1970 1990 2010 2030
Ex
ajo
ule
s
Coal
Oil
Natural Gas
NuclearHydroRenewables
Typical Paris Agreement Transition ScenarioAnnual; 1970 to 2040
Source: BP Statistical Review (1970-2017), IEA (2018 to 2040)
$4.1 Trillion Spent(2000 to 2018)
13 | ARC Energy Research Institute
0
200
400
600
800
1970 1990 2010 2030
Ex
ajo
ule
sTypical Paris Agreement Transition ScenarioAnnual; 1970 to 2040
Source: BP Statistical Review (1970-2018), IEA (2019 to 2040)
$4.1 Trillion Spent(2000 to 2018)
Coal
Oil
Natural Gas
Nuclear
Hydro
Renewables +
Efficiency
14 | ARC Energy Research Institute
Who Will Supply the Future? Who Should?Annual; 1970 to 2040
Source: BP Statistical Review (1970-2017), IEA (2018 to 2040)
Who will
supply this?Oil
Natural Gas
15 | ARC Energy Research Institute
Growth as UsualDemand Plateau
Disruptive Decline
Net Zero
0
20
40
60
80
100
120
2015 2020 2025 2030 2035 2040
MM
B/d
Scenarios for Future Oil Demand2015 - 2040
Source: IEA Current Policies (2016), Statoil Rivalry (2016), EIA Reference Case (2016), Exxon Mobil
(2017), OPEC Reference Case (2016), BP Base Case (2017),Statoil Reform (2016), IEA 450 (2016),
Statoil Renewal (2016), Greenpeace Energy [R]evolution (2015) 16 | ARC Energy Research Institute
Oil Production by Volume and Perceived CorruptionCorruption (Colour) and Size of Oil Production (Black Spots)
17 | ARC Energy Research Institute
Russia
Mexico
Saudi Arabia
Iran
Nigeria
UAE
Iraq
Angola
Kazakhstan
Kuwait
Venezuela
Algeria
Source: Corruption map from Transparency International (2016); Oil volumes by BP Statistical Review 2018
Brazil
Qatar
Colombia
Argentina
Canada
Norway
USA
UK
Australia
Progressive Oil & Gas is Responding to Climate Change
18 | ARC Energy Research Institute
“The oil and gas
industry is reducing
its emissions fast”
“Who cares? You
will be irrelevant in
10 years”
People are Buying Bigger and Bigger GuzzlersTwo-Axle, four-tire trucks, pickups, SUVs, vans less than 8,500 lbs
Source: US Bureau of Economic Analysis (BEA) 20 | ARC Energy Research Institute
30%
40%
50%
60%
70%
80%
2001 2004 2007 2010 2013 2016 2019
% o
f N
ew
Ve
hic
le S
ale
s
US Light Trucks
Estimated Well-to-Combustion EmissionsUS Refined Average Crude Oil (2014)
Source: ARC Energy Research Institute, using input data from US Department of Energy
National Energy Technology Laboratory 22 | ARC Energy Research Institute
Is it really a binary choice?(the goal is to reduce emissions ASAP)
0
50
100
150
200
Kg
CO
2e/B
arr
el
Not All Oil Production Emissions are the Same!GHG Intensities of Various Oil Production Sources Around the World
• US Average represents the weighted average production emissions of all crude oils that were consumed in US refineries in
2014; All plays assume wide Boundary Oil Production GHG Emissions Intensity; KgCO2e/B
Source: ARC Report: “Crude Oil Investing in a Carbon Constrained World (2017 Update)”24 | ARC Energy Research Institute
US
Average*A wide 8:1
‘dynamic range’ in
GHG intensity
Best
Worst
The Growing ESG Movement is ImportantESG reporting will identify progressive companies across all energy systems
25 | ARC Energy Research Institute
UN PRI Signatories (2006 – 2018)