The so-called transition to clean energy is failing and the notion of phasing out oil and gas should be dismissed as unrealistic

Rashid Husain Syed: The oil industry is not dead yetA think tank called Carbon Tracker has found that major oil companies are not meeting the goals set by the Paris climate agreement. The study evaluated the production and transition strategies of 25 of the largest oil and gas companies globally.

According to The Guardian, none of oil companies’ plans align with the primary objective of the 2015 Paris climate accord, which aims to limit global warming to “well below” two degrees Celsius above pre-industrial levels.

According to the think tank’s metrics, its study found that the world’s top 25 global majors received a failing grade. Companies deemed “potentially aligned” with the goals of the Paris Agreement were assigned an ‘A,’ while those farthest from alignment received an ‘H.’

BP, the top-ranked company in the study, was awarded a D grade. Following closely behind were Saudi Aramco, Brazil’s Petrobras, and ExxonMobil, which received G grades. ConocoPhillips fared the worst, receiving the sole H grade. Apart from the gas company Chesapeake Energy, all assessed firms have plans to expand fossil-fuel production in the near term. BP is the only company aiming to reduce its fossil fuel production by 2030. Additionally, only three companies – Spain’s Repsol, Norway’s Equinor, and the UK-based Shell – intend to maintain production levels without any increase.

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The mood in the industry was also evident at the just-concluded CERAWeek, S&P Global’s flagship energy conference in Houston. At the conference, industry leaders underlined that the so-called transition to clean energy is failing and that, in the short term, the notion of phasing out fossil fuels should be dismissed as unrealistic.

“We should abandon the fantasy of phasing out oil and gas and instead invest in them adequately,” said Amin Nasser, chief executive of Saudi Aramco, the world’s largest oil company, to applause in the room.

Nasser added that global oil consumption will reach a new record of 104 million barrels per day this year and could keep growing through 2045. “All this strengthens the view that peak oil and gas is unlikely for some time to come, let alone 2030,” he said. “No one is betting the farm on that.”

Darren Woods, Exxon’s chief executive, bluntly underlined: “We’re not on the path to make net-zero by 2050 currently, and one of the challenges here is that while society wants to see emissions reduced, nobody wants to pay for it.”

Meg O’Neill, chief executive of Woodside Energy, said that the transition to clean energy could not “happen at an unrealistic pace” and predicted that the development of cleaner fuels could take up to 40 years.

“If we rush or if things go the wrong way, we’ll have a crisis that we will never forget,” warned Jean-Paul Prates, chief executive of Petrobras, Brazil’s state-owned oil corporation, about the shift to clean energy.

Industry leaders are not completely off the mark. Fossil fuel is still required.

The Toronto Star reported on Mar. 21 that Ontario’s natural gas power plants were fired up more often last year than in over a decade, marking a significant regression from the province’s achievement of almost eliminating carbon emissions from the electricity system.

The Independent Electricity Systems Operator published year-end numbers for 2023, revealing that 19.1 Terawatt hours of electricity were generated from burning natural gas, a potent greenhouse gas primarily composed of methane. That is 26 percent more than in 2022.

Ontario, which boasted of a grid that was 96 percent non-emitting as recently as 2017, is now only 87 percent carbon-free.

“It should be shocking to the people of Ontario that we’re going in exactly the wrong direction in a time of escalating climate crisis,” said Tim Gray, Executive Director of Environmental Defence.

In a statement to the Star, Ontario Energy Minister Todd Smith, however, defended the increased use of gas plants as a temporary measure necessary to provide energy until non-emitting generation, like nuclear, can be built.

Meanwhile, Alexander C. Kaufman reported that the United States had agreed to invest $500 million into Bahrain’s oil and gas fields. Analysts view this investment as “unusual” yet “geopolitical,” highlighting the Biden administration’s balancing act between climate goals and supporting a key ally in a region where escalating conflicts strain relations. Bahrain is an island country in West Asia.

The project includes drilling 400 new oil wells and 30 new gas wells, increasing its overall emissions of planet-heating pollution to more than 1.4 million metric tons per year, according to the Ex-Im Bank’s environmental impact analysis.

Two advisers on U.S. President Joe Biden’s 18-member climate task force reportedly quit last month in protest against the administration’s support for the Bahrain deal.

Earlier this month, energy-deficient Bangladesh invited international bids for oil and gas exploration in 24 blocks in the Bay of Bengal. This initiative aims to bolster the country’s oil production. Bangladesh plans to drill 100 new gas wells by 2028 as part of its energy strategy.

Earlier this month, Iran also sealed contracts with domestic companies to boost its oil production. Deals worth $13 billion were signed to increase daily oil production in six major fields.

As per targets, Iran plans to increase its output to four million bpd over the next 12 months.

The oil industry is not dead – yet.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, with a particular emphasis on the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.

For interview requests, click here.


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