The Future of Oil and Gas in a Net Zero World

The IEA’s latest projections show that global demand for oil and gas will decline significantly in the coming decades, as the world takes action to fight climate change. To achieve net zero emissions by 2050 and limit global warming to 1.5 degrees Celsius, oil and gas consumption would need to drop by more than three-quarters from today’s levels.

Even if countries only fulfill their current energy and climate commitments, oil and gas demand would still be almost half of what it is now by 2050. Oil and gas companies need to invest more in clean energy solutions, as they currently represent only 1% of global spending on low-carbon technologies. Moreover, four companies account for 60% of that spending.

Fatih Birol, Executive Director of the IEA, said: “COP28 in Dubai will help the oil and gas industry disabuse itself of the misconception that large-scale carbon capture is the solution".

According to the report, every tech-gas company must include a plan to reduce its emissions as part of the energy transition. The production, transportation, and processing of oil and gas emits about 15% of global greenhouse emissions – equivalent to all the energy-related greenhouse gas emissions of the United States.

In such a situation, to limit global warming to 1.5 degrees Celsius as per the Paris Agreement, oil and gas companies need to reduce their emissions by 60% by 2030. If the largest emitting oil and gas producers do this, there is immense potential for improvement in global warming.

Additionally, strategies to reduce emissions from methane – which accounts for half of total emissions from oil and gas operations – are well-known and can generally be adopted at low cost.

Oil and gas spending excessive

Oil and gas investments are too high for a safe climate future, according to a new report. The report estimates that the world spends US$800 billion annually on oil and gas projects, which is twice as much as needed to limit global warming to 1.5 degrees Celsius by 2030.

The report warns that oil and gas companies will face significant losses and risks as the world shifts to a net zero emissions scenario. The projects that the market value of private oil and gas companies could drop by 25% from the current US$6 trillion if countries meet their existing energy and climate goals, and by 60% if the world aligns with the 1.5 degrees Celsius target.

The report suggests that by 2050, almost a third of the energy used in a low-carbon energy system will come from technologies that the oil and gas industry has expertise in – such as hydrogen, carbon capture, offshore wind and liquid biofuels.

The report also emphasizes that oil and natural gas consumption produce high emissions, and carbon capture can mitigate this problem. However, carbon capture is currently underused. To achieve the goal of limiting the global temperature rise to 1.5°C by 2050, we would have to capture and store or use 32 billion tonnes of carbon. This process would require more electricity than the current global demand.

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