IEA warns oil companies doing nothing on emissions is not an option

James Marshall
January 21, 2020

The "deep pockets" of oil and gas (O&G) players could be crucial in accelerating the deployment of renewables, the International Energy Agency (IEA) has said.

It found that "the industry can do much more to respond to the threat of climate change". "Doing nothing is simply not an option", IEA's Executive Director Fatih Birol, said in a statement.

The report comes as world leaders, executives, and financiers - including some of those running the most powerful energy companies - gather this week in the Swiss town of Davos for the World Economic Forum's annual meeting.

Some companies have taken steps to address climate change, but the report said the industry as a whole could do more.

The "immediate task" for the industry is to reduce its operational environmental footprint, Birol said.

Around 15% of global energy-related emissions come from the process of getting oil and gas out of the ground and to consumers, the IEA said.

"There are ample, cost-effective opportunities to bring down the emissions intensity" of producing and delivering oil and gas, such as reducing methane leaks, said the IEA.

But those companies will have to prepare for operations in a changing world, where public opinion towards fossil fuels shifts and increased competition, regulation, and geopolitical factors making for a more volatile financial outlook for an industry that has grown used to largely predictable and profitable returns. It says that scaling up such technologies and lowering their cost requires qualities the industry has, such as large-scale engineering and project management capabilities.

"Without the industry's input, these technologies may simply not achieve the scale needed for them to move the dial on emissions", Birol said.

So far, average investment by oil and gas companies in non-core areas such as renewables, is still limited to around 1% of total capital spending, mostly on solar and wind projects.

It wasn't immediately clear which specific companies IEA would review and how the process would work, but this report includes all worldwide oil and gas companies and most big state-owned ones.

The companies could also increase spending on some clean energy technologies - such as carbon capture.

"Regardless of which pathway the world follows, climate impacts will become more visible and severe over the coming years, increasing the pressure on all elements of society to find solutions". The IEA report found that the combined spending of large oil and gas companies in projects beyond oil and gas was just over $2bn previous year.

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