Fossil Fuel Industry -- Will underground assets become worthless?

Note: 

Most oil and gas

assets are controlled

by nationalized 

( state owned ) 

energy companies.

Their financials 

are very secretive, 

but I finally found 

an estimate 

of underground 

energy assets 

at risk, in the 

Financial Times.

Fossil fuel 

companies hold 

vast oil, gas 

and coal assets 

still underground.

Few energy 

companies

have told investors 

that a significant

percentage

of their assets 

could forever remain 

buried in the ground,

as environmental 

regulations tighten.

Remaining underground

permanently, makes

the assets worthless.

Per the 

Financial Times’ 

Lex column, nearly 

$900 billion worth 

of energy reserves,

or about one-third 

of the value of big oil 

and gas companies,

is at risk of one day 

becoming worthless, 

as the fear of climate

change ramps up.

Meeting the 

very difficult

+1.5C total

global warming

threshold, which

is not likely, 

could leave 

over three quarters 

of the underground 

hydrocarbon reserves 

worthless.

The oil and natural

gas industry is

already suffering 

from low oil

and gas prices, 

so the risk of asset 

write downs 

would further hurt

their stock 

market values.

The national 

oil companies 

are the biggest 

financial risk 

because 

they control

 ~$3 trillion of 

oil and gas assets, 

which is about 

90% of all known 

reserves. 

Publicly traded 

energy companies 

have lost $400 billion 

in their fundamental 

value over the 

past five years.

Chevron Corp.

( NYSE: CVX) 

recently 
reported 

a huge 

$10.4 billion

shale asset 

write down. 

Financial risk burdens 

of fossil fuel companies:

Stranded Assets 

- Underground 

assets that cannot 

be developed and 

sold at a profit.

- Above ground 

energy- related

infrastructure

no longer needed 

Loss of market value

- Downward pressure 

on energy stock 

and bond prices

Rising cost of capital 

- In December 2019,

Goldman Sachs 

ruled out financing 

drilling in the Arctic 

and new thermal coal 

mines anywhere 

in the world.

Other large banks

may join Goldman.

Scarcity of insurance 

- Fewer insurance 

companies will be 

willing to back

fossil furl projects

Insufficient 

renewables 

investment 

- Current investment in 

low carbon energy sources 

by fossil fuel companies 

is less than 1%, meaning 

no plan to replace declining

fossil fuels revenues

in the long run.