Oil and gas majors face 50% production drop by 2030s

9th September 2021


Half of the world's 40 largest listed oil and gas companies will have to slash their production by at least 50% by the 2030s to align with the goals of the Paris Agreement, new analysis has found.

In a report published today, financial think tank Carbon Tracker warns that oil and gas firms risk wasting more than $1trn (£0.7trn) on uncompetitive projects if they continue with business-as-usual investment.

ConocoPhillips is the oil major most exposed to the low-carbon transition, facing a drop in production of 69% by the 2030s, followed by Chevron, Eni, Shell and BP, on 52%, 49%, 44% and 33%, respectively.

Saudi Aramco is the only one of the world’s largest listed oil and gas companies that could see increased production due its large spare capacity from existing fields.

Despite this, the report reveals that companies are still approving billions of dollars of investment in major projects that are inconsistent with the 1.5°C Paris climate target, and even those with net-zero commitments are continuing to explore for new oil and gas.

Mike Coffin, one of the report's co-authors, said that oil and gas companies are “betting against the success of global efforts to tackle climate change”.

“If the world is to avert climate catastrophe, demand for fossil fuels must fall sharply,” he continued. “Companies and investors must prepare for a world of lower long-term fossil fuel prices and a smaller oil and gas industry, and recognise now the risk of stranded assets that this creates.”

The report warns investors that companies have not woken up to the “seismic implications” of the International Energy Agency’s finding that no investment in new oil and gas production is needed if the world aims to limit global warming to 1.5°C.

Although leading companies have adopted net-zero targets, only BP, Eni, TotalEnergies and Shell have acknowledged that their oil production will fall over the coming years. Only BP commits to falls in gas production, which Shell and Eni plan to grow.

The report explains how national climate policies and rapid growth of clean technologies will reduce demand, drive down prices and lead to significantly lower revenues.

This could leave more than $1trn of business-as-usual investment at risk, including $490bn in shale and tight oil projects, and $200bn in deep water projects.

“No new projects and a rapid decline in production could deliver a serious shock to company valuations,” said Axel Dalman, another of the report's co-authors.

“Lower equity valuations would in turn increase the cost of capital and insolvency risk. It is crucial for companies to have a strong transition plan, winding down oil and gas activities in an orderly manner and either diversifying into low-carbon businesses or returning capital to shareholders.”

Image credit: iStock

Subscribe

Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.


Transform articles

A social conscience

With a Taskforce on Inequality and Social-related Financial Disclosures in the pipeline, Beth Knight talks to Chris Seekings about increased recognition of social sustainability

6th June 2024

Read more

Disinformation about the impossibility of averting the climate crisis is part of an alarming turn in denialist tactics, writes David Burrows

6th June 2024

Read more

David Symons, FIEMA, director of sustainability at WSP, and IEMA’s Lesley Wilson, tell Chris Seekings why a growing number of organisations are turning to nature-based solutions to meet their climate goals

6th June 2024

Read more

A system-level review is needed to deliver a large-scale programme of retrofit for existing buildings. Failure to do so will risk missing net-zero targets, argues Amanda Williams

31st May 2024

Read more

Chris Seekings reports from a webinar helping sustainability professionals to use standards effectively

31st May 2024

Read more

Although many organisations focus on scope 1 and 2 emissions, it is vital to factor in scope 3 emissions and use their footprint to drive business change

31st May 2024

Read more

IEMA submits response to the Future Homes Standard consultation

31st May 2024

Read more

What is the role for nature in the Climate Change Act? Sophie Mairesse reports

20th May 2024

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close