The world’s largest listed oil companies will have to cut production by at least 50 per cent over the next decade if the world is to limit global warming to 1.5 degrees as per the Paris climate accord, influential climate think tank Carbon Tracker has warned.
In a new report, the group also claims the oil and gas industry is “still betting against the success of global efforts to tackle climate change”.
It identifies $18 billion (€15 billion) of investment approved in 2020 in major projects that are not consistent with limiting warming to 1.65 degrees.
It also noted that even companies with "net zero" commitments, such as Shell, BP, TotalEnergies, Eni and Equinor, plan to explore for new oil and gas reserves.
Implications
In its report, it claims that oil and gas companies have “not woken up” to the implications of the International Energy Agency’s (IEA’S) recent findings that no investment in new oil and gas production is needed if global climate targets are to be met.
It said 20 of the world’s 40 largest listed companies must plan for a production cut of 50 per cent or more by the 2030s if global climate catastrophe is to be prevented.
By assessing the likely fall-off in production if no further projects are sanctioned as the IEA recommends, Carbon Tracker calculated that US oil company ConocoPhillips is facing the biggest drop in production (69 per cent) followed by Chevron (52 per cent), Eni (49 per cent), Shell (44 per cent), BP (33 per cent), ExxonMobil (33 per cent) and TotalEnergies (30 per cent).
The report warned investors that if companies continue with business-as-usual investment, they risk wasting more than a trillion dollars on projects which will not be competitive in a low-carbon world.
“Rapid declines in production could deliver a serious shock to company valuations, increasing the cost of capital and insolvency risk,” it said.
The report concluded “that it is crucial for companies to have a strong transition plan, winding down oil and gas activities in an orderly manner and diversifying into low-carbon businesses or returning capital to shareholders.”
Emissions
In May, IEA warned that there would have to be an abrupt halt to new oil, gas and coal supply projects if the world wants to reach net zero emissions by 2050.
At a conference in Dublin, IEA chief Fatih Birol warned that the gap between rhetoric and action on climate is widening and that global investment in clean tech would need to more than doubled – to $5 trillion – by 2030 if the world was to achieve its climate goal.
A separate Carbon Tracker report, also released in May, suggested that while the world’s largest oil and gas companies were adopting more ambitious climate targets, they were resisting absolute cuts in their emissions.
It claimed that while many had signed up to “net zero” goals, most were relying on carbon capture and carbon mitigation technologies to achieve their aims – technical solutions that “are unproven at scale,” it said.
