IEA takes aim at oil and gas sector at COP28, industry offers an agreement to cut methane
Energize Weekly, December 6, 2023
As the climate conference – COP28 – opened in Dubai, the International Energy Agency (IEA) fired a shot across the bow of the oil industry with an analysis showing the sector needs to limit investment in fossil fuels, increase financing for clean energy, and curb emissions.
Without those actions and the acceptance that the industry must become smaller as the world moves to a net-zero carbon emissions, it will be impossible to limit global warming.
“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,” IEA Executive Director Fatih Birol said in a statement.
The IEA report prompted a sharp response from the Organization of the Petroleum Exporting Countries (OPEC) Secretary-General Haitham Al Ghais. “This presents a narrow framing of the challenges before us,” Al Ghais said in a statement, “and perhaps expediently plays down such issues as energy security, energy access, and energy affordability.”
“It also unjustly vilifies the industry as behind the climate crisis,” Al Ghais said. “In a world where more dialogue is needed, we repeat that finger pointing is not a constructive approach.”
Still, the role of the oil and gas industry in contributing to climate change and in cutting emissions to limit global warming to the Paris Agreement target of 1.5º Celsius was front and center at the conference held in the United Arab Emirates, one the world’s 10 largest oil producers.
On Dec. 2, the third day of the conference, a coalition of 50 oil and gas companies worldwide pledged to cut methane emissions from the operations by 80 percent to 90 percent by 2030.
The group called the Global Decarbonization Accelerator accounts for about 40 percent of worldwide oil production and includes Saudi Arabia’s Aramco, ExxonMobil, ConocoPhillips, and BP.
Fred Krupp, president of the nonprofit Environmental Defense Fund, told S&P Global that the pledge had the potential to be the most important climate action in more than three decades.
“It could lower the planet’s temperature and reduce cataclysmic storms from what we will otherwise experience in the next decade,” Krupp said.
Methane is more short-lived than carbon dioxide, the main greenhouse gas, but it is 80 times more potent in trapping heat over the first 20 years it is in the atmosphere. The gas makes up about 50 percent of oil and gas emissions, 80 percent of it from upstream operations.
Nevertheless, the agreement was criticized by 300 environmental groups, which said the pledges did not go far enough to reduce the use of fossil fuels.
The IEA analysis starts with the forecast of global oil demand peaking by 2030 even as the industry invests $800 million a year in new projects and infrastructure, double what is needed in 2030 if the global temperature increase is to be limited to 1.5º Celsius.
With that target, the report said, “declines in demand are sufficiently steep that no new long-lead-time conventional oil and gas projects are needed. Some existing oil and gas production would even need to be shut in.”
In a net-zero emissions scenario by 2050, there would still be some oil and gas production, 24 million barrels of oil a day, with 75 percent used to make petrochemicals, and 920 billion cubic meters of natural gas with half used in hydrogen production.
In 2022, global oil production was 93.9 million barrels a day and natural gas production was a little over 4 trillion cubic meters.
Falling demand for fossil fuels will put pressure on producers, with not all operators able to stay in business.
“Market forces naturally favor the lowest-cost production, but that leads to a high concentration in supply among today’s major resource holders, notably in the Middle East,” according to the analysis.
The alternative is for companies to move their businesses to technologies “that could benefit from the industry’s skills and resources – including hydrogen, carbon capture, offshore wind, and liquid biofuels.”
But the sector has been “a marginal force at best in transitioning to a clean energy system,” the report said, with oil and gas companies accounting for just 1 percent of clean energy investment globally – and 60 percent of that coming from just four companies — Equinor, TotalEnergies, Shell, and BP.
“Oil and gas producers around the world need to make profound decisions about their future place in the global energy sector,” IEA’s Birol said. “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.”
