Despite supporting a green transition through the development of renewable energy operations and the use of decarbonisation technologies, the majority of oil majors have no plans to phase out oil and gas any time soon. An increasing number of oil and gas producers are now expanding their portfolios to include renewable energy operations, from wind and solar power to green hydrogen. But this doesn’t mean they’re giving up on the energy sources that brought them all their wealth. Energy firms around the globe are going full throttle on their oil and gas plans to ensure they continue profiting from fossil fuels while the global demand remains high. Instead of shifting to renewable alternatives, they are driving both their fossil fuel and green alternative businesses, while also investing heavily in decarbonisation technologies to respond to pressure from governments and international organisations.
An International Energy Agency (IEA) forecast suggests that oil demand will fall by around 75 percent by 2050, from 2020 levels. Oil prices are therefore expected to decrease to around $35 a barrel in 2030 and $25 a barrel in 2050. But instead of this prediction dissuading oil majors from investing in new operations, it seems to be spurring them on. Oil and gas companies around the world are unwilling to miss out on any potential oil and gas revenues, particularly while global demand continues to remain high. This has led several oil majors to accelerate production to ensure their output is high before demand eventually wanes. Further, the Russian invasion of Ukraine and subsequent sanctions on Russian energy has led many countries around the globe to seek alternative sources. There was a severe oil and gas shortage last year, driving up the price of these fossil fuels. Oil and gas firms worldwide saw record profits, as governments pleaded with OPEC to increase its output to drive down prices, to no avail.
According to a GlobalData analysis of executive fields data, the world’s five largest Western oil majors by revenue – BP, Chevron, ExxonMobil, Shell and TotalEnergies – are planning for a future misaligned with a net-zero pathway, as outlined by the IEA. This may be surprising for some to hear considering that all these companies have also pledged to achieve net-zero carbon emissions by 2050. This is further reflected in the pledges of governments in the countries in which they are based. The analysis is dire, suggesting that the oil and gas extraction plans of just 25 oil majors will contribute CO2 emissions that use up 90 percent of the world’s remaining 1.5°C carbon budget.
The five oil majors mentioned above all have major expansion plans. Together, they hope to develop 157 new fields, in addition to the 1,350 already in operation. This is expected to increase the companies’ oil production from 299 billion barrels of oil equivalent (bboe) to 421 bboe. The analysis shows that four companies – Shell, TotalEnergies, Chevron and Eni, approved a total of $58 billion in funding for new projects in 2021 and the first quarter of 2022, which would produce enough fossil fuel to meet oil and gas demand in a 2.5°C global warming scenario rather than the 1.5°C scenario. The companies are taking advantage of the profits seen in 2022 to the detriment of a global green transition, investing in expensive regions that may not be financially viable when demand falls.
But these oil majors are not apologetic about their decisions. The CEO of TotalEnergies, Patrick Pouyanne, recently defended the company’s greenhouse gas emissions strategy, emphasising that Total remains committed to oil and gas. He confirmed that the firm has allocated almost one-third of its capital expenditure to low-carbon technologies, with the rest earmarked for oil and gas.
Pouyanne stated, “We are in both pillars, and we will remain on both pillars [for a long time].” He added, “Today, our society requires oil and gas … Why we are together, it is 80 percent of fossil fuels. There is no way to think that overnight we can just eliminate all that and rely only on 10 percent of low-carbon energy. It will take decades to build a new system.” Further, “we must do two things: To continue to produce the oil and gas, [while] of course being very strict on the emissions. The question is not fossil fuels, it is emissions, to lower the emissions,” he explained.
Pouyanne stressed the need to drive down oil prices, particularly following the elevated prices of 2022, which led to a global economic crisis and hit consumers particularly hard. The CEO believes that his company should be focusing on low-carbon oil production, rather than moving away from it altogether. This approach has been widely seen by oil majors, many of whom are investing in carbon capture and storage technologies, as well as several other decarbonisation methods. But climate activists worldwide are continuing to lobby against oil and gas companies, asking for stricter government regulations and appealing to firms to do more to support a green transition.
By Felicity Bradstock for Oilprice.com
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