With data is piling up to contradict any claims of “peak oil” within the next few decades, the IEA’s latest report on the oil and gas industry’s role in the transition to net zero pushes a pathway that would jeopardize global energy security and harm the industry’s emissions reduction efforts.
Ahead of COP28, the IEA’s report sets out what the organization believes the global oil and gas sector would need to do to align its operations with the goals of the Paris Agreement.
The report maintains the prediction that oil and gas demand is set to peak by 2030, a forecast previously debunked by EID. And yet, the report highlights that continued investment in oil and gas supply is needed in all scenarios. However, the IEA argues that the current amount being invested in oil and gas is double what is required to meet “declining demand” in a 1.5 °C scenario.
Joe Lassiter, professor of management practice in environmental management at Harvard Business School, is highly skeptical of peak oil claims. Lassiter underscored the need for governments to provide “365 by 7 by 24 energy” for their citizens, noting:
“I will be very, very surprised if oil usage peaks in the foreseeable future, meaning a few decades from now. There’s no reason to believe that the global South won’t take any barrel that’s produced anywhere in the world.”
Similarly, a recent Washington Post analysis confirms this:
“If fossil fuel production were stopped tomorrow, the world would quickly grind to a halt.” (emphasis added)
The IEA calls for oil and gas companies to allocate 50 percent of their capital expenditures towards clean energy projects by 2030, thus diverting capital away from the continued responsible management of oil and gas assets, and the further exploration needed to maintain global energy security. On top of this clean energy investment burden, the IEA scenario would also require producers to simultaneously reduce emissions from their operations.
However, despite calling for the industry to reduce emissions, the IEA discounts the important role that carbon capture and storage (CCS) will play in a shift to cleaner fossil fuel production. IEA Executive Director Faith Birol argues the industry must “let go of the illusion that implausibly large amounts of carbon capture are the solution”, and the report argues that carbon capture “cannot be used to maintain the status quo”.
While CCS should not be seen as a silver bullet, the data clearly supports its important role in reducing emissions across the energy sector and heavy industry. In fact, an IEA report into the role of CCS in clean energy transitions in 2020 found that CCUS accounts for nearly 15 percent of the cumulative reduction in emissions in the IEA’s Sustainable Development Scenario. In the same report, Faith Birol commented:
“No sector will be unaffected by clean energy transitions – and for some, including heavy industry, the value of CCUS is inescapable.” (emphasis added)
So what has changed for the IEA? As we head into COP28, the polarization of energy transition and climate issues is detracting from calls for a secure and cooperative energy transition, and needlessly demonizing vital emissions-reduction technologies like CCS.
Bottom line: The oil and gas industry does not need a ‘moment of truth’. What the industry does need is for stakeholders to recognize and consider the need for continued oil and gas supply in a transition scenario, and to recognize the work the sector is doing, including the technologies that will be key to decarbonizing.
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