Oil emissions progress slows ahead of Cop 29

After a unanimous agreement to "transition away from fossil fuels" at last year's UN Cop 28 summit in Dubai, the oil industry says it stands by its net-zero goals. But its short-to-medium term focus on increasing production appears in conflict with last year's agreement, and with the ambition required from the forthcoming round of national climate plans, expected over the next year.

Large Mideast Gulf national oil companies (NOCs) have mostly stuck to their net zero milestone targets, but continue to avoid making any commitments concerning the Scope 3 emissions that come from the use of their products. These account for the overwhelming majority of oil and gas company emissions.

State-controlled Saudi Aramco is keeping its ambition to reduce by 15pc the carbon intensity of its upstream production by 2035, targeting 7.7kg of CO2 equivalent per barrel of oil equivalent (CO2e/boe) against the company's 2018 baseline figure of 9.1kg CO2e/boe. It intends to achieve net zero Scope 1 and 2 emissions from its operations by 2050.

But last year, Aramco's upstream carbon intensity measure increased by 3.2pc, compared with 2022, to 9.6kg CO2e/boe, in part because the company increased its gas production. Aramco says gas is more energy and carbon-intensive to produce, despite being a lower-emitting fuel when it is used. Riyadh recently put the brakes on Aramco's plan to lift crude production capacity to 13mn b/d from 12mn b/d by 2027 as it ushers in an ambitious gas expansion programme, which fits the view within the industry that gas is a "transition fuel". Aramco plans to increase its gas production by more than 60pc by 2030, compared with its 2021 production. Meanwhile, lower overall hydrocarbon production helped decrease Aramco's Scope 1 emissions by 2.4pc between 2022 and 2023. Its Scope 2 emissions jumped by 26.3pc, although this was mainly because of the inclusion in Aramco's greenhouse gas (GHG) emissions inventory of the new Jazan refinery, which became fully operational in early 2023.

Slower burn

Riyadh is also turning to renewables, with the aim of delivering significant growth in lower-emission power to the national grid and providing an opportunity for Aramco to lower its Scope 2 GHG emissions. Domestic renewable power will free up more crude production for exports and reduce crude burn. Riyadh plans to increase the share of renewables in its oil-and-gas-heavy energy mix to 40pc by 2030.

How Saudi Arabia could change its climate plans by early next year remains to be seen. All Cop parties have to reflect the outcome of Dubai, including transitioning away from fossil fuels, in their new nationally determined contributions (NDCs) — climate plans — due by February 2025. Saudi energy minister Prince Abdulaziz bin Salman said in January that the Cop 28 text was something his country "was willing to agree on because this is something we are doing".

Oil and gas producers the UAE, Azerbaijan and Brazil — the so-called Cop presidencies Troika — last month encouraged parties to "step up the work" on NDCs and keep the Paris Agreement's 1.5°C target in reach. The three countries called on "early movers", including themselves, to signal their commitment as early as September, but always within "national capacities". "The ambition of keeping 1.5°C within reach in a nationally determined manner and building global resilience will be determined by our resolve to act at this critical moment," the three presidencies said.

In Abu Dhabi, state-owned Adnoc is moving forward with plans to raise its crude production capacity to 5mn b/d by 2027, after bringing this to 4.85mn b/d earlier this year. It is also heavily investing in expanding its LNG business. But it has brought forward its ambition to achieve net zero across its operations by five years to 2045. By 2030, it aims to reduce its upstream GHG intensity by 25pc compared with its 2019 level. This metric stayed flat at 7.2kg CO2e/boe in 2023, although Adnoc notes its performance is in the industry's top tier. Adnoc's key advantage is that since 2022, all its onshore activities have received "clean electricity" through the grid from nuclear and solar facilities.

The western majors are sticking to milestone targets that were already in place last year. Shell made a slight adjustment to its 2030 reductions goal for Scope 3 emissions coming from the use of its oil products by introducing a target range of 15-20pc, against a 20pc target previously. BP is sticking to its interim targets for 2025 and 2030, which it revised at the start of 2023, as is TotalEnergies. In the US, Chevron has kept to its target for a portfolio carbon intensity of 71g CO2e across Scopes 1, 2 and 3 by 2028 — representing a 5.2pc decrease against the company's 2016 baseline. ExxonMobil's emission-reduction plans remain the same, aiming to achieve "a 20-30pc reduction in company-wide GHG intensity" by 2030.

Despite the majors making plenty of progress in nearing these 2025-30 emissions-reduction milestones in 2022 and 2023, the latest data reveal this progress began to slow last year. Shell's Scope 1 and 2 emissions fell by just one percentage point in 2023 to 31pc below their 2016 baseline, after having fallen by 12 percentage points the year before. BP's Scope 1 and 2 emissions cuts, compared with its 2019 baseline, remained steady at 41pc between 2022 and 2023. TotalEnergies was one major that improved its progress on Scope 1 and 2 last year, reducing these emissions by 24pc against its 2015 baseline. Although the progress at BP and TotalEnergies means those companies have already dipped below their Scope 1 and 2 emissions targets for 2025, the UK major noted that its "operational emissions are expected to fluctuate" as new oil and gas projects come on stream.

This is an important point, especially as a key factor in the majors' impressive emissions-reduction performance from 2022 has a simple explanation — Russia. As they wrote off billions of dollars of Russian assets, production and any associated emissions took a huge hit. Collectively, the majors' production from 2021 to 2023 fell by 3.7pc to 14.44mn b/d of oil equivalent (boe/d), with Shell and TotalEnergies' output declining by 11.2pc and 11.9pc, respectively.

Production speed-up

Now their production is growing again, with a vengeance. Year to date, they have increased their output by 5.9pc to a combined 15.29mn boe/d. BP, which in 2020 planned to slash its production to 1.5mn boe/d by 2030, now recognises this is likely to remain above its revised target of 2mn boe/d. TotalEnergies wants to grow its energy production, including electricity generation, by 4pc/yr to 2030, but this includes room for 2-3pc/yr growth in oil and gas production too. Shell sees plenty of room to grow its gas production, if not its oil output. Chevron and ExxonMobil, which were never signed up to net zero, continue to raise oil and gas output.

Last year's Cop 28 summit drew intense scrutiny from campaigners, particularly as its president, the UAE's special envoy for climate change Sultan al-Jaber, was steadfast in bringing oil and gas companies to the table. This year's summit host, Azerbaijan, is drawing similar attention. Cop 29 president-designate Mukhtar Babayev, the country's ecology minister, has responded by calling on oil producing countries and companies to contribute to a climate fund. The fund will target $1bn, a tiny drop in the climate finance ocean. The move should revitalise the conversation about polluters paying to tackle climate change, but the oil industry has remained silent so far.

By Bachar Halabi, Jon Mainwaring and Caroline Varin