Oil, Gas Firms Need to Do More to Cut Emissions: IEA
The International Energy Agency (IEA) has called on oil and gas companies to step up efforts to address climate change in a report published on January 20. But it also wants new supplies to keep coming, to replace declining fields and provide affordable security of supply.
“Fossil fuels drive the companies’ near-term returns, but failure to address growing calls to reduce greenhouse gas emissions could threaten their long-term social acceptability and profitability,” the IEA said in its Oil and Gas Industry in Energy Transitions report.
It highlighted increasingly visible antipathy towards fossil fuels among the public, at least in parts of Europe and North America, as one risk companies faced.
Some firms have taken steps to support combating climate change, but as a whole the industry could do much more, the agency said, estimating that companies on average were channelling less than 1% of their spending towards alternative energy technologies.
“No energy company will be unaffected by clean energy transitions,” the IEA’s director Fatih Birol said in a statement. “Every part of the industry needs to consider how to respond. Doing nothing is simply not an option.”
Given the industry’s diversity, companies will have to adopt different strategies to respond to the challenges.
“The first immediate task for all parts of the industry is reducing the environmental footprint of their own operators,” Birol said. “As of today, around 15% of global energy-related greenhouse gas emissions come from the process of getting oil and gas out of the ground and to consumers. A large part of these emissions can be brought down relatively quickly and easily.”
This goal can be delivered on by reducing methane leaks, cutting flaring and integrating renewables and other low-carbon energy sources with new upstream and LNG projects, the IEA said.
“Also, with their extensive know-how and deep pockets, oil and gas companies can play a crucial role in accelerating deployment of key renewable options such as offshore wind, while also enabling some key capital-intensive clean energy technologies – such as carbon capture, utilisation and storage and hydrogen – to reach maturity,” Birol continued. “Without the industry’s input, these technologies may simply not achieve the scale needed for them to move the dial on emissions.”
However, IEA cautioned that investment in oil and gas development would need to continue to avoid output declining at a faster rate than demand.
The IEA’s report will be presented to government and industry leaders during the World Economic Forum (WEF) in Davos on January 21.
Last week, the chair of the UK offshore regulator Oil & Gas Authority said that the upstream's "‘social licence to operate’ is under serious threat and there is no scope of a second chance." A number of banks and investment houses are reducing their shareholdings in oil and gas companies,