CDP: Oil and Gas Industry Lagging on Low Carbon Investments

This year the global oil and gas industry is only investing 1.3% of total capital expenditure in low carbon assets, a new CDP report found. European oil and gas majors were slightly ahead at 7%, but overall this represents a drop in the bucket compared to the industry’s greenhouse gas emissions.

Called “Beyond the Cycle,” the new report for investor members and signatories updates and expands CDP’s research and League Table for oil and gas companies published two years ago. Report authors Luke Fletcher, Tom Crocker, James Smyth, and Kane Marcell ranked 24 of the largest and “highest-impact” publicly listed oil and gas companies on their business readiness for a low-carbon transition.

The production and use of oil and gas accounts for more than half of global greenhouse gas emissions associated with energy consumption, the report authors say. This equates to more than 17 metric gigatons of carbon dioxide equivalent per year, according to CDP.

Companies ranked in the report represent 31% of worldwide oil and gas production, and 11% of proved reserves. CDP assessed these companies in four key areas aligned with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD): transition risks, physical risks, transition opportunities, and climate governance and strategy.

“Since 2010, the 24 companies have invested $22 billion in alternative energies,” the report found. “However, spend on low-carbon assets for the sector as a whole remains low, expected to account for only 1.3% of total 2018 CAPEX.”

Among the report’s findings:

• Five companies have officially supported the TCFD
• Five companies have divested from oil sands assets
• Nine companies have published 2-degree scenario analysis with others looking to do the same
• 15 companies have set emissions reduction targets
• 18 companies have disclosed Scope 3 emissions figures alongside Scope 1+2 for 2017
• Votes for shareholder resolutions relating to 2°C analysis grew from an average of 21% in 2014 to 53% in 2018

In the new rankings, Equinor came in first with Total, Shell and Eni all closely together in second, third, and fourth. European companies tended to come out on top in most key areas, CDP said. “They are pivoting portfolios towards gas, setting climate-related targets, and investing in low-carbon technologies,” the report noted.

The lowest ranked companies are CNOOC, Rosneft, and Marathon Oil. Chinese companies tended not to disclose emissions data. Apache, BP, Chevron, CNOOC, ExxonMobil, and Marathon Oil did not respond to CDP’s 2018 climate change questionnaire, the international nonprofit said.

“Low-carbon technologies and regulatory change is disrupting the established order of the energy industry,” said Luke Fletcher, report co-author and senior analyst at CDP. “As well as diversifying into clean energy assets, oil and gas companies are shifting focus to multi-staged developments and shorter-cycle opportunities to improve their capital flexibility and resilience for the changes ahead.”