ExxonMobil has aligned with the global OPEC cartel in challenging the International Energy Agency (IEA) and the global push for net-zero emissions, setting the stage for a major debate. The central issue: how drastically can we reduce oil and gas demand without causing widespread economic damage on the road to achieving net-zero carbon emissions by 2050?
This debate heated up during COP28 in Dubai last year and is expected to intensify at COP29 in Baku, Azerbaijan, this November.
Signatories of the 2015 Paris Agreement, which aims to limit global warming to below 1.5 degrees Celsius, have agreed that significant reductions in oil and gas production are necessary to meet net-zero targets. The IEA, once closely aligned with OPEC, has joined this consensus, advocating for a faster shift from fossil fuels to clean energy. The IEA celebrated a record $2 trillion investment in clean energy last year, surpassing fossil fuel investments for the first time. IEA Executive Director Fatih Birol has urged oil and gas companies to reconsider their business strategies, citing a looming “staggering” surplus of fossil fuel production in the coming decade.
OPEC Secretary General Haitham Al Ghais quickly countered, asserting that oil remains crucial for global prosperity and energy security. He highlighted that population growth and urbanization will drive energy demand, noting that 700 million people still lack electricity. Al Ghais pointed out that $9.5 trillion has been invested in the clean energy transition since 2000, yet wind and solar energy only account for 4% of global energy use, and electric vehicles make up just 3% of vehicles on the road. He argued that, given the robust and diverse future demand, oil and gas will continue to be needed at current levels. According to him, the Paris Agreement aims to reduce emissions, not oil demand.
ExxonMobil also weighed in with its “Global Outlook to 2050,” which argues that oil and natural gas will remain vital under any realistic scenario. The report predicts that demand will plateau above 100 million barrels per day starting around 2030. It stresses the need for ongoing investment, warning that without it, oil and gas supply could shrink by 15% annually, leading to a 400% increase in oil prices by 2030.
Given their vested interests, OPEC and ExxonMobil’s perspectives are not surprising. However, BP’s 2024 Energy Outlook offers a more cautious view. BP’s analysis suggests that the current path will fall short of the emission cuts required to approach net-zero targets. It highlights the risk that the carbon budget needed to limit warming to 1.5 degrees Celsius could be depleted in the 2040s if fossil fuel emissions are not significantly reduced.
Despite the evident biases of ExxonMobil and OPEC, there is a key difference in their analyses. They believe that improved energy efficiency and advancements in carbon capture and storage can address the fossil fuel sector’s carbon emissions problems. However, a Reuters report from last November, based on data from the Global CCS Institute, revealed that there are only 42 operational commercial carbon capture projects. Of these, 30 are developed by oil companies to enhance extraction from old wells, leaving just 12 focused on permanent storage. These projects capture 49 million tonnes of carbon, or about 0.13% of global industrial emissions. Reuters concluded that the oil and gas industry’s reliance on carbon capture is excessive and largely illusory.
The IEA has echoed this concern, stating that we need to capture 1 billion tonnes of carbon per year by 2030. However, current capacities and committed investments cover only 20% of this target for capture and 15% for storage. The IEA calls for “greater ambition.”
Progress has been slow. Reports in May revealed that two major carbon capture projects in Canada were abandoned, including a $1.8 billion project in Alberta aimed at capturing 3 million tonnes of carbon from a gas-fired power plant. Capital Power officials acknowledged that while carbon capture is technically feasible, it is not economically viable at present.
With such stark differences in opinions on the future of oil and gas and the significant lobbying power of OPEC and oil companies, the upcoming UN climate conference is likely to be highly contentious.