Oil and gas producers face pivotal choices about their role in the global energy system amid a worsening climate crisis fuelled in large part by their core products, according to a major new special report from the International Energy Agency.
The IEA report, ‘The Oil and Gas Industry in Net Zero Transitions’, finds that the oil and gas sector – which provides more than half of global energy supply and employs nearly 12 million workers worldwide – has been a marginal force, at best, in transitioning to an energy system with net zero emissions, accounting for just 1% of clean energy investment globally. The report shows how the industry can take a more responsible approach and contribute positively to the new energy economy. The UN's COP28 climate summit in Dubai is “a moment of truth” for the oil and gas sector it says.
To start, all oil and gas companies should commit to tackling emissions from their own operations, according to the report. These emissions need to decline by 60% by 2030 to align with the Paris Agreement goal of limiting global warming to 1.5 °C. Companies also need to dramatically change how they allocate their financial resources. In 2022, clean energy investments accounted for a mere 2.5% of the industry's total capital spending. The report finds that producers looking to align with the aims of the Paris Agreement would need to put 50% of capital expenditures towards clean energy projects by 2030.
Business as usual ‘not good enough’
Further, companies must abandon the notion that they can continue with business as usual simply by ramping up the deployment of carbon capture technologies. The report finds that if oil and gas consumption were to evolve as projected under today’s policy settings, limiting warming to 1.5 °C would require an entirely inconceivable 32 billion tonnes of carbon capture by 2050, with annual investment rising from $4 billion last year to $3.5 trillion.
Opportunities lie ahead despite these challenges, however. Nearly a third of the energy consumed in 2050 in a decarbonised energy system comes from technologies that could benefit from the oil and gas industry’s skills and resources, including hydrogen, offshore wind and liquid biofuels.
About the report
‘The Oil and Gas Industry in Net Zero Transitions’ analyses the implications and opportunities for the industry that would arise from stronger international efforts to reach energy and climate targets.
It also examines how transitions increase the likelihood of boom and bust cycles for oil and gas producer economies. It highlights strategies for producer economies that could complement broader reforms to build macroeconomic stability and the role of international partners to support this process.
The report sets out a ‘fair and feasible way forward’ in which oil and gas companies and producer economies take a real stake in the clean energy economy while helping the world avoid the most severe impacts of climate change.
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