Under increasing pressure, most oil and gas companies in the Western world are investing in green energy, but without abandoning fossil fuels, arguing that it is necessary to meet the demand for oil and gas, at the risk of missing the objective of carbon neutrality in 2050.
In the middle of an audience of shareholders, voices chant “Go to hell! “. The scene unfolded Tuesday at Shell’s general meeting in London, targeted by dozens of environmental activists. And history repeats itself. After Shell, BP and Barclays, a bank accused of financing the exploitation of hydrocarbons, TotalEnergies is also preparing to experience a stormy general assembly on Friday, as in 2022.
Since 2021, the International Energy Agency (IEA) has been urging the world to halt all new oil exploration projects to limit global warming to 1.5 degrees above pre-industrial levels. But new oil fields continue to open.
Not enough renewable energy
The oil and gas industry, especially in Europe, has certainly set itself objectives to change and reduce its greenhouse gas emissions. But the sector’s investments in renewable energy in 2022 represented less than 5% of its expenditure on the exploration and extraction of fossil fuels, according to the IEA. It was only 1% in 2020. European oil and gas companies are doing better, but even at home, investments “are tiny compared to their spending on oil and gas expansion”, laments David Tong, portfolio manager. word of Oil Change International.
The room for improvement is enormous. In addition to renewable energy, companies could direct “more spending” towards technologies such as carbon capture and storage, biogas, hydrogen and low-emission fuels “which seem to be a good fit with their expertise”, estimates Christophe McGlade, head of the IEA’s energy supply unit. “It could really shake things up,” he said.
In the entire energy sector, a trend is confirmed in any case: investments in low-carbon energies are accelerating, with solar power ready to exceed in 2023 the amounts devoted to oil extraction. Thus, 380 billion dollars per day should go to solar energy, against 370 for oil production, according to the latest IEA report.
From oil to gas
Most of the efforts of large companies for the climate relate to their direct emissions and those related to the energy they consume themselves, which in total represent 15% or less of their carbon footprint (scopes of ” scopes 1 and 2” in the jargon). They achieve this, for example, by fighting against leaks of methane (natural gas).
BP has thus reduced these emissions by 41% in 2022 compared to 2019 and announced the objective of 50% for 2030, against 30-35% expected in 2020. Even American companies, long reluctant, are getting started. ExxonMobil aims to reduce company-wide emissions by around 20% by 2030 compared to 2016.
However, the essential is elsewhere: these are the indirect emissions linked to the combustion of oil in cars or gas in heating (“ scope 3”) that represent 85% or more of their carbon footprint. Their decline mechanically implies that we are increasingly doing without oil (and in the long term, gas).
However, BP announced this year that it was going to increase its investments in low-carbon energies in the same way as in oil and gas, and thus slow down the pace of its transition. An environmental outcry. Instead of reducing indirect emissions linked to its production by 35-40% from 2019 to 2030, BP is now counting on 20-30%.
At TotalEnergies, indirect emissions are expected to remain at their current level until 2030, i.e. below 400 million tonnes per year, barely less than the 389 million in 2022. Oil will only represent around 30% of its sales over the decade (compared to 55% in 2019), but the group will on the other hand considerably increase its gas sales. “The sector in 2030 will be more dominated by gas than oil,” summarizes Moez Ajmi, energy consultant at EY.
IEA’s Christophe McGlade says: “If companies are betting on a continued increase in demand for oil and gas, they are implicitly assuming that we will not reach our net zero targets by 2050.”