Oil and gas producers: continuing to do business at the expense of the climate

06/30/2023

Source: energy & management powernews

Green promises, nothing behind them? The goals of the Paris climate agreement apparently matter next to nothing to the top 100 gas and oil producing companies, according to a survey.

The oil and gas industry, which is posting record profits, is facing criticism for being too lax on climate ambitions. According to a post-2021 analysis by the nonprofit CDP and World Benchmarking Alliance (WBA), few of 100 global companies responsible for about 80 percent of global oil and gas production are recognizably on a 1.5-degree target. According to the Paris Climate Agreement, global warming should not be more severe than in the pre-industrial era in order to contain widespread environmental disasters.

The list of accusations is long:

- No company will reduce its direct and immediate emissions (scopes 1 to 3) by 2028 to a level consistent with the 1.5-degree pathway
- Only 18 out of 100 corporations would have set net-zero targets
- Upstream and downstream emissions in the value chain account for around 80 percent of all emissions, but only 28 percent of companies would even set savings targets for this sector
- The ten companies based in the EU and EFTA (Iceland, Liechtenstein, Norway and Switzerland) with oil and gas production would not significantly reduce output by 2030, and would actually increase it by a peak in 2028

The latter point is at odds, CDP and WBA say, with the International Energy Agency's (IEA) "net-zero emissions by 2050" scenario. This calls for no new oil and gas development beyond projects approved in 2021. Furthermore, production would have to decline sharply by 2030.

Corporations even link bonuses to fossil fuel growth

Hopes for a change of course are low. That's because more than 50 percent of companies, the analysis found, link bonuses for their executives to fossil fuel growth. Only a quarter of the companies answered the question of how much of their investments they put into decarbonization technologies.

The ranking: Neste ahead of Engie and Total

Those who have set net-zero targets come mainly from Europe: 12 of the 18 companies. With Neste from Finland, a European company also performs best in the ranking, which also includes social factors. But the petroleum company, which also produces renewable fuels and raw materials for the chemical and plastics industries, has come under criticism for not initiating a shift away from fossil fuels and for its corporate strategy not being in line with the 1.5-degree target.

Running in behind Neste are Engie, Total Energies (both France), Naturgy Energy (Spain), Eni (Italy), Origin Energy (Australia), Galp Energia (Portugal), Repsol (Spain), SK Innovation (South Korea) and Austria's largest industrial company OMV.

The worst performers in the assessment are Turkmengaz (Turkmenistan), Libya's oil company, Petroleos (Venezuela), and the joint bottom performers Basra Oil Company (Iraq) and Iran's oil company.

Only Finland's Neste spends big on low-carbon future

Further, the survey shows that only three European companies spend more than 50 percent of their investments on low-carbon technologies: Neste (88 percent), Naturgy (59 percent) and Engie (51 percent). The benchmark for "net zero" is actually 77 percent of spending.

Another figure also startles analysts: The industry had invested the equivalent of around 460 billion euros in new wells and oil production in 2022. Accordingly, there are no plans to phase out fossil fuels or curb production, they said.

Consequently, Vicky Sins finds it "worrying that not a single company has committed to halting the expansion of fossil fuel activities before 2030." She leads decarbonization and energy transition efforts at WBA. CDP principal analyst Laurent Babikian adds that if the oil and gas sector did not set and meet targets, "we will not be able to avert the worst impacts of climate change and achieve a society with a net zero environmental impact."

Financial institutions, policymakers and the public must now put pressure on companies, one demand said. "Our findings," Vicky Sins said, "are a warning to all stakeholders - investors, policymakers and the public - to hold the oil and gas sector accountable."

The " 2023 Oil and Gas Benchmark " ranking by CDP and WBA is posted online.

Author: Volker Stephan