Oil and Gas Producers are Setting Us on a Course for Severe Climate Change Disruption

The oil and gas industry intends to spend an estimated $4.9 trillion over the next 10 years to explore for and extract oil and gas from new fields. An analysis from Global Witness concludes that we can’t afford any production from new oil and gas fields if we’re to meet the U.N. Paris Climate Agreement goals and avoid moving beyond a critical climate change tipping point.

Furthermore, Global Witness concludes that existing oil and gas fields’ production is already incompatible with reducing GHG emissions to a level consistent with achieving the 1.5°C limit.

Mean global temperature has increased 1° Celsius (1.8°F). An additional 0.5°C rise this century would likely result in severe climate change impacts— more extreme annual temperature ranges, sea level rise, more frequent and intense storms, droughts and floods, and ecosystems and natural resources disruption, according to the coalition of the world’s leading climate scientists who produce the U.N. International Panel on Climate Change (IPCC) reports. Those most vulnerable, stand to hit hardest, highlight the authors of Global Witness’s report, Overexposed: How the IPCC’s 1.5° Report Demonstrates the Risks of Overinvestment in Oil and Gas.

A crucial turning point

“The oil and gas industry is at a crucial turning point,” according to Global Witness. Industry capital expenditure has dropped more than one-third since 2014, in large part due to slumping oil prices. That said, forecasts call for a rise of more than 85 percent over the next decades, with annual capex exceeding $1 trillion.

• All of the $4.9 trillion forecast capex in new oil and gas fields is incompatible with limiting warming to 1.5°C.
  9% of oil and 6% of gas production forecast from existing fields is incompatible with limiting warming to 1.5°C.
• Two-thirds of that is to occur in new oil and gas fields in which development has yet to begin and investments have yet to be approved, such as the various parts of the Arctic. Among those that are expected to be approved by government authorities include U.S. domestic shale fields, Argentina’s Vaca Muerta shale, the Kashagan oil field in Kazakhstan and Russia’s Yamal “megaproject,” according to Global Witness.

Over-investing in oil and gas exploration and production raises prospects that investors will be left holding a bag of stranded assets— oil and gas fields and infrastructure that has either become uneconomic due to falling demand or has contributed to rising GHG emissions to the point where rapid climate change causes extreme socioeconomic and environmental disruption and degradation, Global Witness points out.

Some leading privately owned oil and gas multinationals, such as Total, have been investing in a broad range of young, innovative renewable energy, energy storage and other smart grid and cleantech companies with an eye towards gradually making them a more significant part of their businesses. More recently, BP and Shell have announced a number of initiatives along the same lines, pushed in that direction by pressure from large investors, as well as some in government and increasing competition from enterprising clean energy companies.

“While these steps are nowhere near enough, they show that investors are already able to bring about change in these companies,” Global Witness’s report authors say. “If we can escalate that pressure now, it’s still possible to stop these huge investments before they get started. Investors must ensure that oil and gas companies are on track to achieve the 1.5°C target, rather than heading for the disastrous impacts of burning fossil fuels like there’s no tomorrow.”

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