Discussion Paper: Assessing Oil And Gas Climate Plans
Price of Oil / Oil Change International
(September 23, 2020) — What would you say to an arsonist who promised to light fewer fires? That’s what the world’s biggest oil companies are doing right now.
This past week, we published a new assessment of the latest climate pledges from BP, Chevron, Eni, Equinor, ExxonMobil, Repsol, Shell, and Total. In the paper, called Big Oil Reality Check, we focus specifically on how these companies’ plans stack up against the bare minimum of what’s needed to limit global warming to 1.5 degrees Celsius as outlined in the Paris Agreement.
Horrifying fires are raging across the West Coast of the United States. This year’s cyclone and hurricanes seasons are breaking record after record. Frontline communities and Indigenous Peoples across the world continue to rise up to protect their land and water from extractive industries. Global oil and gas markets are crumbling in the face of the ongoing COVID-19 crisis.
Even now, in the face of all this, with their social license and financial bottom lines facing unprecedented threats, the world’s big oil and gas companies are still not confronting the reality of the climate crisis. Just burning the oil and gas reserves in already developed fields and wells globally would push the world beyond 1.5ºC, even if coal use were phased out overnight.
As one might expect from corporations notorious for decades of climate deception, the climate plans we looked at use fancy terminology and convoluted metrics to cover up still grossly inadequate levels of action.
If you want to go beyond just reading the new analysis, you can help spread the word on social media. Together, we can make sure people aren’t taken in by these companies’ hollow promises.
Big Oil Reality Check
This briefing was written by David Tong based on research by Kelly Trout with contributions from Hannah McKinnon and Lorne Stockman. All are with Oil Change International.
Increasingly, oil and gas companies claim to be part of the solution to the climate crisis — but the reality is very different. In this discussion paper, we analyze the current climate commitments of eight of the largest integrated oil and fossil gas companies — BP, Chevron, Eni, Equinor, ExxonMobil, Repsol, Shell, and Total (the “oil majors”) — in light of the ambition and integrity required to achieve a 1.5 degrees Celsius (°C) aligned managed decline of oil and fossil gas.
None of the evaluated oil majors’ climate strategies, plans, and pledges come close to alignment with the Paris Agreement. This discussion paper intends to spark and inform discussion, as well as encourage careful and critical analysis of oil and gas climate pledges and plans.
ESTABLISHING BOTTOM LINES FOR A MEANINGFUL CLIMATE COMMITMENT
Past Oil Change International research shows that burning the oil, gas, and
coal in existing fields and mines around the world would push average global temperature rise far beyond 1.5°C, and exceed a 2°C carbon budget.1 Even if global coal use were phased out overnight, developed oil and gas reserves would still push the world beyond 1.5°C.
If oil and gas companies were serious about the Paris Agreement, they would need to end new oil and gas exploration and extraction now and phase out production from existing developed reserves. This phase out would need to reflect the principles of a Just Transition.3
Building any further infrastructure, investing any further capital, or employing any further workers to exploit additional fossil fuel reserves will only create even more “carbon lock-in” — making it more difficult, both politically and economically, to limit production.4
FAILURE ACROSS THE BOARD: THE OIL MAJORS’ CLIMATE PLANS
This discussion paper measures oil and gas company climate plans against ten minimum criteria that they must meet to have the possibility of being 1.5°C-aligned. Meeting these criteria alone would not guarantee 1.5°C alignment, but they are essential preconditions for it. As shown in Table ES-1, the oil and gas majors’ commitments largely fail this baseline test.
STILL INVESTED IN GROWING PRODUCTION TO 2030
Most of the oil majors are still on track to significantly increase their oil and gas production between now and 2030. This is according to Rystad Energy projections based on the assets they currently hold and are planning to sanction. Only one oil major, BP, has committed to cutting oil and gas extraction by 2030. However, it has excluded around 30 percent of the carbon pollution associated with its extraction investments from that commitment. Almost all oil and gas majors are still on track to increase their overall contribution to the climate crisis between now and 2030, as shown in Figures ES-2 and ES-3.
This trajectory will not meaningfully shift until these companies commit to not develop new projects in their development pipeline and/or phase out some of their existing assets early. (BP’s recent commitment does not show up in these projections because BP has not yet shifted its asset portfolio to match it.)
There is an alternative pathway, as shown in Figure ES-4. By stopping investments in new fields, stopping putting new reserves into production, and accelerating the phase-out of some existing production, oil and gas production would decline at a pace aligned with 1.5°C.
CUTTING CORNERS IN “NET-ZERO” PLEDGES
Several oil majors’ “net zero” emissions pledges contain large exclusions. Examples include ignoring certain jurisdictions where climate regulations don’t already exist, or excluding projects where companies share ownership with another company. Others provide no guarantee that the company will cut what matters most for the climate: the absolute level of carbon-dioxide pollution associated with burning the oil and gas they produce.
CONCLUSION: OIL AND GAS COMPANIES WILL NOT MANAGE THEIR OWN DECLINE
No major oil and gas company has released a climate pledge or sustainability plan that meets the bare minimum criteria for alignment with the Paris Agreement. In order to ensure a phase out that reflects the urgency and ambition of the Paris temperature limits across the entire oil and gas sector, governments must step in to manage the decline of production and facilitate a Just Transition.
BIG OIL AND GAS REALITY
SINCE RELEASING ITS LATEST CLIMATE PLAN, TOTAL HAS SIGNED DEALS WORTH USD 15 BILLION TO FORGE AHEAD WITH CONSTRUCTION OF A MASSIVE LIQUEFIED NATURAL GAS (LNG) EXPORT FACILITY IN MOZAMBIQUE THAT IS FUELING HUMAN RIGHTS VIOLATIONS, CORRUPTION, VIOLENCE, AND INEQUALITY. TOTAL’S CONSTRUCTION ACTIVITIES WERE ALSO LINKED TO THE COUNTRY’S LARGEST CORONAVIRUS OUTBREAK.96
This year, the COVID-19 crisis has put people’s health, jobs, and lives at risk, as well as throwing the global energy economy into turmoil. The oil and gas industry had spent the last decade investing in an oversupply of oil and gas. Then, low oil prices and a near-term drop in demand combined to cause immediate financial and logistical stress for the fossil fuel industry.6
The disruption caused by the global pandemic hit the oil and gas industry at a time when companies were already lagging in confronting long-term reality: the structural transformation of our energy system driven by ever- cheaper renewables and pressure to act on the climate crisis. As a result, oil and gas companies are laying off workers, cancelling projects, and even abandoning polluting infrastructure entirely.7
In the five years after the Paris Agreement, many of the oil majors have released successive climate strategies, plans, and pledges. Increasingly, they claim to be part of the solution to the climate crisis — but the reality is very different. These companies continue to pursue aggressive lobbying strategies and demand bailouts and loopholes to preserve, and in most cases increase, fossil fuel production.8
Meeting the Paris Agreement’s goals will require governments to proactively manage the phase-out of oil, fossil gas, and coal production. That is, to limit warming this century to less than 1.5°C above pre-industrial levels, governments will need to phase out fossil fuels in a predictable, people-centered, and Paris-aligned way. To “build back better,” governments need to break free of the unstable boom-bust cycles of fossil fuel extraction.
We are currently witnessing an unmanaged decline in oil and gas. Even before COVID-19, the fossil fuel industry was already showing signs of financial decline.
Current events, however, provide no guarantee that fossil fuel production will stay in long-term decline. They also provide no indication that the current decline will be at the pace needed to limit global warming to 1.5°C, or that this decline will be a just, equitable one — unless governments intervene to manage the decline in production and implement Just Transition measures.
This is the context for the oil majors’ current climate promises, and why they must not be taken at face value. These plans need critical assessment: Do they align with the Paris Agreement’s ambition? Do they have integrity? Do they plan for a Just Transition?
This discussion document outlines a ten point framework for assessing whether oil and gas companies’ climate change promises and strategies meet a minimum criteria to align with the Paris
Agreement. It then applies this framework to the current climate claims of eight of the largest integrated oil and gas companies — BP, Chevron, Eni, Equinor, ExxonMobil, Repsol, Shell, and Total. Finally, it analyzes recurring themes and problems.
NOTES ON METHODOLOGY
To maintain a consistent baseline for analysis across companies, we look at the total oil and gas these companies invest in extracting from the ground, the associated carbon pollution — and their plans to reduce that (or not) — as the primary metric of their climate responsibility. Therefore, we do not account for oil and gas that companies may refine or sell from third parties but do not invest in extracting themselves. Oil and gas that’s not extracted, cannot be refined or burned.a
We use the Rystad Energy UCube database as our primary source for historical and projected data on oil companies’ production. Rystad is an independent oil and gas consultancy that maintains a bottom-up database and economic model of all upstream oil and gas projects in the world. Where Rystad projections are used, they are based on Rystad’s long-term base oil price scenario of USD 60/bbl (real $, as of August 2020).
If these companies were committing to a clear production phase-out, then this analysis would not be needed. However, it is difficult to clearly assess the climate implications of many company plans because where they lack ambition, they substitute complexity.
Table of Contents
INTRODUCTION: BIG OIL CLIMATE PLANS DON’T STACK UP 5
NOTES ON METHODOLOGY 5
ESTABLISHING A BASELINE 6
THE BIG PICTURE AND THE NEED FOR A MANAGED DECLINE 6 TEN BASELINES FOR OIL AND
GAS COMPANY CLIMATE COMMITMENTS 7
FAILURE ACROSS THE BOARD:
HOW THE OIL MAJORS’ CLIMATE PLANS MEASURE UP 13
APPLYING THE FRAMEWORK 13 RECURRING THEMES 14
CONCLUSION: OIL AND GAS COMPANIES WILL
NOT MANAGE THEIR OWN DECLINE 20
EXECUTIVE SUMMARY 1 INTRODUCTION: BIG OIL CLIMATE PLANS DON’T STACK UP
NOTES ON METHODOLOGY
ESTABLISHING A BASELINE
THE BIG PICTURE AND THE NEED FOR A MANAGED DECLINE
TEN BASELINES FOR OIL AND GAS COMPANY CLIMATE COMMITMENTS
FAILURE ACROSS THE BOARD: HOW THE OIL MAJORS’ CLIMATE PLANS MEASURE UP
APPLYING THE FRAMEWORK 13 RECURRING THEMES
CONCLUSION: OIL AND GAS COMPANIES WILL NOT MANAGE THEIR OWN DECLINE
Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.