BAKU, Azerbaijan, May 3. Climate change costs will become more material over time, DBRS Morningstar, the world's fourth largest credit ratings agency, said, Trend reports.
“Oil and gas (O&G) companies are also investing more capital each year on climate change initiatives such as CCUS, and some companies are shedding carbon-intensive assets to reduce GHG emissions. While we consider the impact of the Carbon and GHG Costs risk factor Relevant, it is currently not sufficient on its own to negatively affect the ratings for O&G companies rated by us. However, should this factor become Significant, it could well trigger negative rating actions,” reads the latest report released by DBRS Morningstar.
The report reveals that demand for O&G products has continued to increase over the past decade, driven primarily by economic growth in emerging economies.
“O&G still remains a key cornerstone of today's energy landscape. The negative impact of Carbon and GHG Costs on the financial performance of companies currently is mostly minor. This impact does vary, with the ratings of conventional, less-carbon-intensive O&G producers less affected relative to carbon-intensive O&G producers such as companies that operate oil sands projects,” reads the report.
DBRS Morningstar notes that the strength of crude oil and natural gas prices and the strength of a company's balance sheet are also key considerations when assessing the materiality of the Carbon and GHG Costs risk factor.
“Nonetheless, climate change costs are increasing and are expected to become more material over time. Margins on the production and processing of oil and natural gas will come under pressure,” says the report.
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