PARIS: The International Energy Agency (IEA) says the oil and gas sector - including COP 28 president and simultaneously CEO of the Abu Dhabi Oil Company (ADNOC) Sultan Al Jaber - is faced with taking responsibility for a worsening climate crisis or maintaining business as usual.
If governments deliver in full on their national energy and climate pledges in order to keep global warming to 1.5 °C, the IEA says the legacy energy sector can make a positive contribution to the green economy and reach net-zero emissions by mid-century.
A new IEA report explores what an industry that currently provides more than half of global energy supply and employs nearly 12 million workers worldwide can do to accelerate a net zero transition.
Since 2018, the annual revenues generated by the oil and gas industry have averaged close to US$3.5 trillion. Around half of this went to governments, 40 percent went into investment and 10 percent was returned to shareholders or used to pay down debt.
The report points out that while attention is often focused on the role of the seven large international companies – Exxon et al - they hold less than 13 percent of global oil and gas production and reserves.
By contrast, national oil companies (NOCs) account for more than half of global production and hold nearly 60 percent of the world’s reserves.
At the same time the US$800 billion invested in the oil and gas sector each year is double what is required in 2030 if the NOCs - including ADNOC – keep to the agreed 1.5 °C limit and no new oil fields.
So who would be the last company still producing energy from fossil fuel asks the IEA? The report finds the current valuation of private oil companies could drop from US$6 trillion to just US$2.4 trillion if the world’s governments manage to limit global warming to 1.5 °C and demand falls an eventual 75 percent.
On a positive note, the agency says the sector is well placed to use its technology resources to decarbonise a fossil fuel-based energy system with hydrogen, carbon capture, offshore wind and liquid biofuels.
However this would mean an increase in clean energy from US$20 billion in 2022 to 50 percent of capex by 2030 – in addition to the cost of reducing emissions from individual operations.
The IEA also notes that carbon capture technology (CCT) cannot be used by corporations who want it both ways – keeping fossil fuels while limiting global temperature rise to 1.5 °C.
This scenario would require an “inconceivable” 32 billion tonnes of carbon captured for use or storage by 2050, including 23 billion tonnes via direct air capture (DAC).
The report adds the necessary CCT would require 26,000 terawatt hours of electricity generation to operate in 2050, which is more than global electricity demand in 2022.
And it would also require over US$3.5 trillion in annual investments from 2023 to 2050 – which, coincidentally, is an amount equal to the oil industry’s annual average revenue in recent years.
“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,” says IEA executive director Fatih Birol. “The industry needs to commit to genuinely helping the world meet its energy needs and climate goals – which means letting go of the illusion that implausibly large amounts of carbon capture are the solution.”
A report published in September 2023 by Oil Change International concluded if 20 countries, led by the U.S., halted their planned new oil and gas extraction, 173 billion tonnes of carbon pollution would be kept in the ground and thus make it possible to hold global temperature rise to 1.5˚C.
In addition to the U.S., Canada, Australia, Norway and the UK are responsible for 51 percent of all planned expansion from new oil and gas fields through 2050. The other 15 countries are the UAE, Saudi Arabia, Russia, Iran, China, Brazil, Argentina, Iraq, Mexico, Guyana, Nigeria, Qatar, India, Turkmenistan and Kazakhstan.
The U.S. was responsible for one in every five barrels of oil and gas extracted globally in 2022 as it led the world in new oil and gas extraction commitments to 2050.
Much of the country’s planned growth is tied to oil and gas fracking and LNG, centered in the Permian Basin of Texas and New Mexico and along the U.S. Gulf Coast.
While president Biden’s Inflation Reduction Act (IRA) encourages new renewable energy and clean technology deployment, it does not guarantee any reduction in U.S. oil and gas production.
Domestically, U.S. federal and state governments are estimated to spend as much as US$20 billion annually supporting the fossil fuel sector. In addition the IRA authorizes billions of dollars for carbon capture projects and tax credits estimated to be worth up to US$100 billion by 2030.
The report noted if the IRA succeeds in reducing oil and gas consumption within the U.S., it allows for increasing amounts of U.S. oil and gas production to be exported and burned elsewhere, contributing to more global emissions.
The UAE’s ADNOC, under Al Jaber’s leadership, is expected to approve enough oil and gas expansion by 2025 to lock in 2.7 Gigatonnes of CO2 emissions as the country becomes the seventh largest expander of oil and gas production by 2050.
Oil Change International says this will make it impossible for the country to meet its own emissions reductions strategy under the Paris Agreement, concluding Al Jaber is choosing greenwash over climate leadership as it asks: “Will the UAE sideline the interests of its oil and gas industry to act as an honest broker for an ambitious outcome on fossil fuel phase out or will COP28 mark the final stage of the capture of global climate talks by the forces of delay and climate chaos?”
Story Type: News