stranded asset risk

Yet an analysis of the proven reserves of
oil companies suggests otherwise. The average
life-span of assets is just under ten years, and
two-thirds have already been developed, of which
one-third will be developed within the next five
years.

With this resource effectively already
deemed commercial, infrastructure-backed, or
committed for commercial development on the
basis of prevailing prices, it is extremely unlikely
this would not be produced out.

Looking at probable reserves – the so-
called P2 reserves – the asset life-span moves
out to 20 years for oil and 25 years for gas, so
the risk of being stranded may appear greater at
first. But similarly, most of this is already
infrastructure-backed or in current development.

In fact, just ten per cent of the existing P2
resource base in both oil and gas has not been
subject to a final investment decision. With a
present value of $20bn, it represents just two
per cent of the oil majors’ market value.