Every part of industry must respond: report
But oil, gas sector investment still needed
Industry should look to cleaner fuel development
The International Energy Agency on Monday called on oil and gas companies to accelerate efforts to help the transition to cleaner energies, while at the same time conceding that investment in oil and gas would still be needed.
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In a report published Monday, the IEA said a failure by companies to address growing calls to reduce greenhouse gas emissions “could threaten their long-term social acceptability and profitability.”
“The oil and gas industry now needs to make clear what clean energy transitions mean for it — and what it can do to accelerate clean energy transitions,” the agency said.
The past year has seen a significant switch in mood around the activities of oil and gas companies, with increasing numbers of environmental protests and financial institutions pulling back from some fossil fuel project investment.
“No energy company will be unaffected by clean energy transitions,” IEA executive director Fatih Birol said in a statement.
“Every part of the industry needs to consider how to respond. Doing nothing is simply not an option,” Birol said.
While calling on companies to respond, the IEA acknowledged that investment in oil and gas projects would still be needed — even in rapid clean energy transitions.
“If investment in existing oil and gas fields were to stop completely, the decline in output would be around 8% per year,” the agency said.
“This is larger than any plausible fall in global demand, so investment in existing fields and some new ones remains part of the picture,” it said.
Still, the oil and gas industry has the tools to contibute to the energy transition.
“The first immediate task for all parts of the industry is reducing the carbon footprint of their own operations,” Birol said.
“As of today, around 15% 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,” he said.
Reducing methane leaks to the atmosphere is the single most important and cost-effective way for the industry to bring down these emissions.
But, the IEA said, 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.
“Also, with their extensive know-how and deep pockets, 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, utilization and storage, and hydrogen — to reach maturity,” Birol said.
“Without the industry’s input, these technologies may simply not achieve the scale needed for them to move the dial on emissions.”
The IEA said another essential task would be to step up investment in fuels that can deliver the benefits of oil and gas without net carbon emissions, such as hydrogen, biomethane and advanced biofuels.
In the absence of low-carbon fuels, transitions become much harder and more expensive, it said.
“The scale of the climate challenge requires a broad coalition encompassing governments, investors, companies and everyone else who is genuinely committed to reducing emissions,” Birol said.
“That effort requires the oil and gas industry to be firmly and fully on board.”