Topics in this section: - Oil, gas C02 strategies won't limit warming to 2 degrees Celsius - Leaders emerge in carbon transition - Cuts needed to limit warming to 2 degrees Celsius - With no direct path, different approaches emerge - As climate crisis nears, transparency a challenge
These analyses are by Bloomberg Intelligence Senior ESG Analyst Eric Kane.
Only seven of 39 oil and gas companies have carbon-reduction targets that match levels needed to keep temperatures from rising 2 degrees Celsius. Though carbon transitions will vary by company, renewable energy, offsets and capture are key components. Despite the risks, many companies have yet to develop reduction strategies.
Leaders emerge in carbon transition
Oil and gas companies are setting targets to reduce operational (Scope 1 and 2) greenhouse-gas emissions, but most may fall short of the International Energy Agency's 2030 Sustainable Development Scenario. Eni, Equinor, Total, Reliance, Galp, Occidental and Valero are the only companies, in our view, that have targets in-line with the scenario. Eni aims to have net-zero upstream emissions by 2030 and for the entire company by 2040. Europe's integrated oil companies continue to set more ambitious targets than global peers and companies in the refining and marketing and exploration and production industries.
Shell, BP, OMV, Repsol and Santos aim for net zero by at least 2050, suggesting a positive long-term transition outlook.
Cuts needed to limit warming to 2 degrees Celsius
Just seven of 39 companies are expected to meet the IEA's Sustainable Development Scenario (SDS), our analysis shows. According to the SDS, which is aligned with limiting warming to well below 2 degrees Celsius, oil and gas companies must reduce operational Scope 1 and 2 greenhouse-gas emissions by 44% by 2030 from 2018 levels. The IEA estimates that a majority of these reductions can be achieved by cutting methane. Given that Scope 1 and 2 emissions from companies we analyzed account for almost 4% of global emissions, a failure to meet this target could have a significant impact.
To achieve its goal, the IEA says oil production must decrease to 85 million barrels a day in 2030 from 95.4 million in 2019, while natural gas output decreases to 3.998 trillion cubic meters from 4.089 trillion in the same period.
With no direct path, different approaches emerge
Oil and gas companies are developing strategies to reduce carbon intensity in response to investor pressure and shifting demand away from fossil fuels. However, these paths vary significantly in ambition and focus. For the 12 companies in the peer set that announced carbon-neutral ambitions, renewable energy, offsets and carbon capture may be integral. Eni, Repsol and Total are among those that have announced targets for renewable or low-carbon generating capacity. Eni plans to have more than 55 gigawatts of installed renewable capacity by 2050.
Shell has announced plans to invest up to $200 million in natural ecosystems between 2020-21 as a way to generate carbon credits and offset emissions. BP is among those that acknowledge carbon capture, use and storage will be critical to its transition efforts.
As climate crisis nears, transparency a challenge
Climate change and the need to transition to a low-carbon economy pose significant tests for the oil and gas sector. Greenhouse-gas emissions data continue to improve in consistency and comparability as investors demand transparency on how the issue is managed. However, incomplete data sets and lack of information still present challenges when assessing carbon performance and transition strategies. Of the 39 companies we analyzed, eight don't provide enough historic data to determine reduction trends. Further, 13 companies failed to offer comprehensive strategies to reduce greenhouse gas.
For those that provide quantitative targets, units, timelines and details can vary significantly, making a comparative analysis difficult.
