Calgary – The oil and gas industry needs to step up its efforts to address the risks of climate change or becoming socially unacceptable and unprofitable, according to a new report from the International Energy Agency.
“No power company will be affected by the clean energy change,” Fatih Biral, the IEA’s executive director, said in a statement on Monday.
At the same time, the world is demanding reduction in energy services and emissions, the report said. Social pressure on the industry is growing, it noted, highlighting growing opposition to new infrastructure projects and sanctions in certain areas.
“Every part of the industry needs to consider how to respond. Doing nothing is simply not an option. “
Some companies have taken steps to tackle climate change, but the report says the industry as a whole could do more.
According to the report, produced in collaboration with the World Economic Forum and to be presented at the organization’s annual meeting in Davos, Switzerland on Tuesday, diversified industries require different approaches depending on the situation of individual companies.
The “immediate job” for the industry is to reduce its operational environmental footprint, Birol said.
The report found that about 15 percent of the world’s energy-related greenhouse gas emissions come from extracting oil and gas from the ground and from consumers.
“A large portion of these emissions can be brought down relatively quickly and easily,” Biral said.
The report says that the most important and cost-effective measure would be to reduce methane leaks in the atmosphere. Other measures include integrating renewable and low-carbon power into new upstream and liquefied natural gas (LNG) development.
The report argues that the industry and its resources and efficiency will be “critical” in helping to achieve some key capital-intensive clean energy technologies, such as low-carbon hydrogen and biofuels maturity. It says that such technologies require industry capabilities, such as large-scale engineering and project management, to scale and reduce their costs.
“Without industry input, these technologies would not be able to achieve the scale needed to move dials in emissions,” Birol said.
On average, oil and gas companies invest about one percent of their total capital expenditure in non-core areas – most notably in solar photovoltaics (PV) and air. Leading individual companies spend about five percent, according to the report, which adds “many more significant changes” to capital spending allocations to accelerate energy transfers.
The report says that without the help of the oil and gas industry, the energy sector could change, but it is a more difficult and expensive path.
“No matter what path the world takes, the effects of climate change will become more visible and severe in the coming years, increasing the pressure on all elements of society to find solutions. These solutions cannot be found in today’s oil and gas paradigm.”
This report was first published in The Canadian Press on January 20, 2020.