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Ahead of this year's 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28), chaired by the United Arab Emirates and to be held in Dubai between November 30 and December 12, the International Energy Agency (IEA) analysed how the global oil and gas sector can align its operations with the Paris Agreement targets and published its special report titled Oil and Gas Industry in Net Zero Transformation.

According to the report, even with today's policies, global oil and gas demand is expected to peak by 2030 and decline thereafter. It is predicted that stronger steps to limit the effects of climate change will reduce the demand for both resources more quickly.

It is estimated that if governments fully accomplish their commitments in their current policies, global oil and gas demand will decrease by 45 percent compared to its current level by 2050.

In contrast, achieving net zero emissions by 2050 for the goal of limiting the global temperature increase to 1.5 degrees requires oil and gas consumption to decline by more than 75 percent compared to its current level.

Therefore, the oil and gas sector, which accounts for more than half of the global energy supply and provides 12 million jobs around the world, faces a critical choice between continuing to contribute to the deepening climate crisis, predominantly through its own operations, and accelerating the transformation to a clean energy system.

The value of oil and gas companies will decrease from today's $6 trillion

Currently, oil and gas companies account for 1 percent of the world's clean energy investments, and 60 percent of these investments are held by four companies alone. Large-scale private sector companies have a 13 percent share of global oil and gas production and reserves.

While operations covering the production, transportation, and processing of oil and gas cause approximately 15 percent of emissions from the energy sector, the IEA states that every company should have a transformation strategy that includes reducing emissions from its operations.

Companies with emissions reduction targets currently account for nearly half of global oil and gas production.

While emissions from the oil and gas industry must decrease by 60 percent by 2030 to be compatible with the goal of limiting the temperature increase to 1.5 degrees, improvements to be made, especially the low cost of technologies that are effective in reducing methane emissions, make emission reduction possible.

The $800 billion invested in the oil and gas sector each year is nearly twice the amount of annual investment required for the roadmap consistent with the goal of limiting global warming to 1.5 degrees.

While the decline in demand is expected to be sharp enough to not require a new oil and gas project and even to shut down some existing oil and gas production facilities, in a net zero transformation scenario, the oil and gas sector is predicted to be a less profitable and risky business.

It is estimated that if countries' national energy and climate targets are achieved, the value of oil and gas companies may decrease by 25 percent compared to the current level of 6 trillion dollars and by 60 percent if the target of limiting the temperature increase to 1.5 degrees is achieved.

"The decisions the industry makes will have consequences for decades to come"

In his evaluation of the report, President Fatih Birol said, "The oil and gas industry is facing a turning point at COP28 in Dubai. While the world is struggling with the effects of the worsening climate crisis, it is neither socially nor environmentally responsible for the industry to continue business as normal," he said.

Stating that oil and gas producers need to make radical decisions to decide their place in the future of the global energy system, Birol said:

"The industry needs to be truly committed to helping the world meet its energy needs and climate targets, and that means giving up the illusion that capturing incredibly large amounts of carbon is the solution. This special report shows that while oil and gas companies have a real stake in the clean energy economy and the world's climate, it shows a fair and workable path forward to help companies avoid the most serious impacts of change. The fossil fuel industry must make tough decisions now, and those decisions will have consequences for decades to come. Clean energy progress will continue with or without oil and gas producers. However, the journey to net zero emissions will be more costly and difficult if the industry is not on this path.”

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