Only five out of 39 oil and gas companies have carbon-reduction targets that match levels needed to avoid a 2-degree Celsius temperature rise. While carbon transition paths will vary by company, renewable energy, offsets and carbon capture are key components. Despite the risks, many companies have yet to develop reduction strategies.
Oil and gas companies continue to set targets to reduce their operational (Scope 1 and 2) greenhouse gas emissions, but most may fall short of the International Energy Agency's 2030 Sustainable Development Scenario. Eni, Total, Reliance, Galp and Woodside are the only companies, in our view, that have targets in-line with the scenario for 2030. Eni aims to have net-zero upstream emissions by 2030 and net-zero emissions for the entire company by 2040. The European integrated oil companies continue to set more ambitious targets than their non-regional peers and to 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.
Based on our analysis, just five of 39 companies are expected to meet the IEA's Sustainable Development Scenario (SDS). According to the SDS, which is aligned with limiting warming to well below 2 degrees Celsius, oil and gas companies must reduce their operational Scope 1 and 2 greenhouse gas emissions intensity by 44% by 2030 from 2018 levels. The IEA estimates that a majority of these reductions can be achieved by cutting methane emissions. Given that Scope 1 and 2 emissions from companies we analyzed account for almost 4% of global emissions, their 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 2018, while natural gas production increases to 4,264 bcm from 3,937 in the same period.
Oil and gas companies continue to develop strategies to reduce their 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 eight companies in the peer set that announced carbon-neutral ambitions, renewable energy, offsets and carbon capture may be integral. Eni, Repsol and Total announced targets for renewable or low carbon-generating capacity. Eni plans to have more than 55 GW 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 that carbon capture, use and storage will be critical to their transition efforts.
Climate change and the need to transition to a low-carbon economy pose a significant challenge to the oil and gas sector. Greenhouse gas emission data continues 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 strategy. Of the 39 companies we analyzed, only Valero doesn't report greenhouse gas emissions. Seven other companies don't provide enough historic data to determine reduction trends. Further, 19 companies failed to offer comprehensive greenhouse gas-reduction strategies.
For those that provide quantitative targets, units, timelines and details can vary significantly, making a comparative analysis challenging.
