IEA: Big Oil Faces ‘Moment of Truth’ Over Renewables Investment

The oil and gas industry faces a moment of truth in its choice to either support decarbonization or continue to contribute to climate change, the International Energy Agency (IEA) said in a new report on Wednesday.

As energy industry professionals and policymakers are preparing for the COP28 climate summit in Dubai later this month, the IEA says that oil and gas producers looking to align with the Paris Agreement goals need to invest 50% of their capital expenditures in clean energy projects by 2030, on top of the investment needed to reduce their Scope 1 and 2 emissions.

To compare, the oil and gas industry invested around $20 billion in clean energy in 2022. That’s just 2.5% of its total capital spending, the IEA says.

So far, oil and gas companies that have announced a target to diversify their activities into clean energy account for just under one-fifth of current global oil and gas production, according to the agency.

A moment of truth is coming for the oil and gas industry as most companies are watching the energy transition from the sidelines, with oil and gas producers accounting for only 1% of total clean energy investment globally, the IEA said. 

The agency also reiterated its forecast that its demand trajectory for fossil fuels in a 1.5 °C scenario “leaves no room for new fields.”

“Many producers say they will be the ones to keep producing throughout transitions and beyond. They cannot all be right,” the agency said in its report.

“The oil and gas industry is facing a moment of truth at COP28 in Dubai,” IEA Executive Director Fatih Birol said in a statement.

“With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible.”

The world’s largest international oil and gas majors have changed their tune on medium to long-term strategies since the Russian invasion of Ukraine and the energy crisis last year. 

All European majors continue to target net-zero emissions by 2050, but some of the biggest, including BP and Shell, have scaled back promises to cut back oil and gas production and have signaled they would be there to provide the world with fossil fuel energy as long as it needs it.

By Tsvetana Paraskova for Oilprice.com

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