IEA’s Oil and Gas Industry in Energy Transitions report indicated that oil and gas companies are not investing enough towards clean energy transitions.
Some oil and gas companies are diversifying their energy operations to include renewables and other low-carbon technologies. However, average investment by oil and gas companies in non-core areas has so far been limited to around 1 percent of total capital spending, with the largest outlays going to solar PV and wind, the report said.
Some oil and gas companies have also diversified by acquiring existing non-core businesses – for example in electricity distribution, electric-vehicle charging, and batteries – while stepping up research and development activity. But overall, there are few signs of the large-scale change in capital allocation needed to put the world on a more sustainable path.
An essential task is to step up investment in the fuels – such as hydrogen, biomethane and advanced biofuels – that can deliver the energy system benefits of oil and gas without net carbon emissions.
Within 10 years, these low-carbon fuels would need to account for around 15 percent of overall investment in fuel supply if the world is to get on course to tackle climate change. In the absence of low-carbon fuels, transitions become much harder and more expensive, the report said.
While some oil and gas companies have taken steps to support efforts to combat climate change, the industry as a whole could play a much more significant role through its engineering capabilities, financial resources and project-management expertise, according to the IEA’s Oil and Gas Industry in Energy Transitions report, which was released today.
As of today, around 15 percent of global energy-related greenhouse gas emissions come from the process of getting oil and gas out of the ground and to consumers. A large part of these emissions can be brought down relatively quickly and easily,” Fatih Birol said.
Reducing methane leaks to the atmosphere is the single most important and cost-effective way for the industry to bring down emissions. There are ample other opportunities to lower the emissions intensity of delivered oil and gas by eliminating routine flaring and integrating renewables and low-carbon electricity into new upstream and LNG developments.
Oil and gas companies can play a crucial role in accelerating deployment of key renewable options such as offshore wind, while also enabling some key capital-intensive clean energy technologies – such as carbon capture, utilisation and storage and hydrogen – to reach maturity.
National oil companies account for well over half of global production and an even larger share of reserves. Some are high performing, but many are poorly positioned to adapt to changing global energy dynamics.
This report was produced in cooperation with the World Economic Forum (WEF). It will be presented to government and industry leaders during the WEF’s Annual Meeting in Davos on January 21.