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Reoility Check

Reoility Check

The oil majors are reporting soaring profits, but the pressure on them to decarbonise continues to mount. Driving down demand could force them to go faster.

Last year the International Energy Agency was unequivocal on the future of oil and gas exploration: it had to stop. In its Net Zero to 2050 roadmap the agency said falling fossil fuel demand would mean there was no need to look for more.

Demand has since dipped, but then gone up, not down. The US has hosted its biggest ever auction of offshore oil and gas exploration licences, and the supermajors – the world’s biggest private sector, publicly traded energy companies – have posted three sets of bumper quarterly figures. Some are making more money from oil and gas than ever before.

As mentioned here last week, nearly 800 new oil wells were drilled worldwide in 2021. The IEA says producers will pump “at or above all-time highs” this year, and global oil consumption, according to official US government data, will grow by 3.6 million barrels a day to a record 100.52 million barrels a day in 2022.

Against this background, senior executives from BP, Shell, Chevron and ExxonMobil turned down an offer to appear today before Congress in DC today to explain how their firms’ decarbonisation plans align with the Paris climate goals. They’ve all made net zero plans but they’re all still exploring. Two of them have no plans to move away from fossil fuels at all – and those two have richly rewarded their investors.

The plans (by market cap, smallest first):

  • BP, which this morning announced an annual profit last year of $12.8bn, promises to be a net zero company by 2050 or sooner, including scope 3 and upstream emissions. It said it won’t explore any countries where it doesn’t already have a presence, but began four major drilling projects in 2020 and is likely, by the end of 2021, to have been producing 900,000 more barrels of oil equivalent every day than in 2016. Market cap: $79 bn.
  • Shell promises to be a net-zero emissions energy business by 2050, including scope 3. However, it is exploring in 33 countries and developing or producing in 26 and last month began drilling in Namibia, in partnership with state-owned Qatar Petroleum. Market cap: $176 bn.
  • Chevron pledges to be net zero in scope 1 and 2 emissions by 2050, but not including scope 3. Exploration remains, it says, “essential to [its] business”, and it planned to drill 25 exploration and appraisal wells around the world last year. Market cap: $266 bn.
  • ExxonMobil has committed to having net-zero emissions in its own operations in the Permian Basin (across Texas and New Mexico) by 2030, and overall by 2050, not including scope 3. It plans to increase shale gas output in New Mexico and Texas by 25 per cent this year. It’s also just found new oil off Guyana, in South America. Market cap: $347 bn.

So far, the US majors haven’t suffered for shunning renewables. On the contrary, over the past year ExxonMobil has recorded the biggest share price increase of the four, while over the past five years Chevron has delivered the best overall return on investment.

But pressure on the majors is rising. Today’s hearing of the US House of Representatives’ Oversight Committee is the second in an ongoing investigation by Congress intended to make Big Energy do more to shrink carbon footprints and ratchet up climate ambition. 

  • Last time, CEOs refused to deny that their companies were still funding climate change misinformation.
  • This time, the committee invited directors who should be more environmentally minded – but, in a revealing turn of events,  they rejected the offer. Exxon’s Alexander Karsner, who was forced onto the board by Engine No. 1, a small activist hedge fund pushing the company to be better prepared for climate change, and Susan Avery, an atmospheric physicist and president emerita of the Woods Hole Oceanographic Institution, have been asked to come back on 8 March. Instead, climate scientists will examine their promises. “These members are scientists and activists, people that understand the severity of our current situation and have previously called for action,” said Subcommittee Chairman Ro Khanna. “Now, they will face a choice. Will they contradict their CEOs and admit more must be done on climate or will they choose fealty?”

The hearing has value in piling on that pressure, but it will be more theatrical than forensic and it will only address half the decarbonisation puzzle – supply.

That leaves demand. “As long as there is demand for those products, there’s going to be supply,” says Samantha Gross, an energy and climate expert at Brookings. And if the oil majors stop producing, national oil companies – principally from Russia, Saudi Arabia and the other Opec countries – will step in.

For demand to fall, regulators have to mandate the decarbonisation of heat, light, heavy industry, shipping and freight as they have started to do for cars. EVs may be forcing rapid change in one sector – but that sector accounts for barely 8 per cent of global emissions. It’s only the beginning.


Heat costs
Europe won’t be the region worst affected by climate change (low-lying island nations, Africa and the Middle East are all more vulnerable) but it does face mounting costs from floods, storms, heatwaves and drought. According to the European Environment Agency, such weather- and climate-related events cost the 32 countries of the European Economic Area €450-520 billion and killed between 85,000 and 145,000 people from 1980 to 2020. Floods and storms were the most expensive events, and the IPCC says all regions in Europe will see an increase in heavy precipitation in years to come. But heat is the killer: 91 per cent of those who died did so in heatwaves. Between half and 75 per cent of all weather- and climate-related fatalities since 1980 died in the heatwave of summer 2003.

science and technology

Coastal ecosystems
New research led by the University of Queensland has shown that just 15 per cent of coastal regions are ecologically intact. Most such studies to date have focused on the integrity of either land or marine areas, rather than liminal areas, including mangroves and wetlands, which are critical for conservation and food-gathering (read, fishing) and function as a barrier against storms. Humans have had a heavy impact on almost half – 48 per cent – of coastal regions and 43 per cent of protected coastal areas, and have degraded more than half of coasts in 84 per cent of countries. The dataset behind the findings is free and open to use.


Some corporate sustainability targets accredited by the Science-based Targets Initiative, a standard-bearer on net zero targets, are vague or exaggerated according to the Corporate Climate Responsibility Monitor. A report published yesterday, which examined the 25 companies with the highest annual revenues in 2020, and which are responsible for five per cent of global emissions, found that targets from companies including Unilever and Ikea have “very low integrity”. Many, it said, were “undermined by contentious plans to reduce emissions elsewhere, hidden critical information and accounting tricks”. Just one firm – the Maersk shipping giant –  had targets judged to be of “reasonable integrity”. It’s betting on being able to power ships with ammonia, a colourless fuel that can be made using renewable electricity, water and air. 


Burning up
More than 600 hectares of forested land have been destroyed after a fire broke out in Aberdares National Park in Kenya on Saturday. The area is home to protected elephant species and endangered black rhinos. Such fires, globally, added 1.76 billion tonnes of carbon to the atmosphere last year according to Copernicus, the EU’s atmospheric monitoring agency, but they also affect soils and lead to land-use change. Wildfires in Africa cover the biggest global share of burned territory and create emissions equal to 14 per cent of global CO2 emissions from fossil fuel burning. While they can be part of a functioning savannah ecosystem, they are sometimes set by people clearing lands for farming. Initial reports suggest the Aberdares fire may be a case of arson, and the Kenyan government is investigating.

Thanks for reading.

Ellen Halliday

Edited by Giles Whittell.

Photographs Getty Images

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