This paper provides detail on the methodology to prepare the supply side data and demand scenario used in the accompanying asset level analysis of oil & gas production in a carbon-constrained scenario.
Methodology used is broadly similar to that used in Carbon Tracker’s Carbon Supply Cost Curve papers, in particular the November 2015 “Danger Zone” report, with the following key points:
- A 15% IRR has been used to calculate “breakeven” prices. This level is closer to that which we believe should be a sanction hurdle rate for new projects than the 10% IRR frequently used for calculating breakeven prices.
- A production and CO2 timeframe of 2017-2035 has been used. The use of 2035 as an end point is consistent with Carbon Tracker’s November 2015 “Danger Zone” report.
- The IEA’s 450 scenario has been used as the 2°C demand scenario focus, rather than the Carbon Tracker estimate of the remaining carbon budget.
- Capex data has been presented in real terms to 2025.
- Rystad’s base case has been used for oil & gas production, including uncommercial assets. Oil and gas figures should be thought of as being more similar in scale to expected production and capex rather than relative to full supply potential.
Further details are provided throughout this document.