Oil and gas producers can explore opportunities in the ongoing global shift to cleaner sources of energy as the world strives to attain climate targets, according to a newly-released report from the IEA.
The IEA report titled “The Oil and Gas Industry in Net Zero Transitions” analyzes the implications and opportunities for the industry that would arise from stronger international efforts to reach energy and climate targets. Released ahead of the COP28 climate summit in Dubai, the special report sets out what the global oil and gas sector would need to undertake to align its operations with the goals of the Paris Agreement.
“The oil and gas industry is facing a moment of truth at COP28 in Dubai. With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible,” said IEA Executive Director Fatih Birol.
“Oil and gas producers around the world need to make profound decisions about their future place in the global energy sector. The industry needs to commit to genuinely helping the world meet its energy needs and climate goals,” he added.
Even under today’s policy settings, global demand for both oil and gas is set to peak by 2030, according to the latest IEA projections. Stronger action to tackle climate change would mean clear declines in demand for both fuels. If governments deliver in full on their national energy and climate pledges, demand would fall 45 percent below today's level by 2050. In a pathway to reaching net zero emissions by mid-century, which is necessary to keep the goal of limiting global warming to 1.5 °C within reach, oil and gas use would decline by more than 75 percent by 2050.
Oil and gas companies currently account for just 1 percent of clean energy investment globally – and 60 percent of that comes from just four companies.
“Every company’s transition strategy can and should include a plan to reduce emissions from its own operations, according to the report,” the IEA said.
“The production, transport and processing of oil and gas results in nearly 15 percent of global energy-related greenhouse emissions – equal to all energy-related greenhouse gas emissions from the United States. As things stand, companies with targets to reduce their own emissions account for less than half of global oil and gas output,” it added.
To align with a 1.5 °C scenario, the industry’s own emissions need to decline by 60 percent by 2030.
However, the report finds that the oil and gas sector is well placed to scale up some crucial technologies for clean energy transitions. In fact, about 30 percent of the energy consumed in 2050 in a decarbonized energy system comes from technologies that could benefit from the industry’s skills and resources – including hydrogen, carbon capture, offshore wind, and liquid biofuels.
This would require a step-change in how the sector allocates its financial resources. The oil and gas industry invested around $20 billion in clean energy in 2022, or roughly 2.5 percent of its total capital spending. The report finds that producers looking to align with the aims of the Paris Agreement would need to put 50 percent of their capital expenditures toward clean energy projects by 2030, on top of the investment required to reduce emissions from their own operations.
