Industry

CCUS Reliance to Maintain O&G Output Trends “Pure Fantasy”

Amount of carbon capture required for 1.5°C pathway “inconceivable” if fossil fuel production remains unchecked, says IEA. 

The International Energy Agency (IEA) has warned that the oil and gas sector cannot rely on carbon capture utilisation and storage (CCUS) to reduce emissions while maintaining or ramping up production.  

The IEA’s ‘Oil and Gas Industry in Net Zero Transitions‘ report, published ahead of COP28 in Dubai, estimates that in a 1.5°C world approximately 30% of the energy consumed in 2050 must come from clean technologies, including hydrogen, CCUS, offshore wind and biofuels.  

CCUS works by capturing CO2 from fuel combustion or industrial processes, transporting it via ship or pipeline for reuse as an energy source or funnelled into permanent storage deep underground in geological formations. 

IEA pointed out that the oil and gas industry has been an investor or project partner in more than 90% of CCUS capacity in operation around the world. Further, over 40% of CCUS investment since 2010 has been in projects directly related to oil and gas value chains. 

In comparison, only around 2% of operational offshore wind capacity was developed by oil and gas companies, according to the report. It also noted that despite fossil fuel firms doubling their clean energy investments in last year to US$20 billion, the sector also only accounts for 1% of total global investment. 

“Several people say that we can continue with our fossil fuel trends and with CCUS, and at the same time fulfil our obligations to reach our climate goals,” said Fatih Birol, Executive Director at the IEA.  

“This is impossible, the numbers don’t work at all.” 

According to the United Nations Development Programme’s 2023 Production Gap Report, many major fossil fuel-producing governments are still planning near-term increases in coal production and long-term increases in oil and gas production.  

The report noted that oil and gas companies increased their upstream investments by 39% to nearly US$500 billion in 2022 worldwide, the highest level since 2014. 

In June, a report from the Institute for Energy Economics and Financial Analysis also found that despite net zero commitments, the top 20 regional oil and gas producers generate an average of 96% of their revenue directly from oil and gas production and related activities. 

Affordable at scale? 

US$4 billion was invested CCUS last year, but Birol said capturing emissions from current oil and gas production trends to bring emissions in line with climate targets would require about US$3.5 trillion in annual investment in the technology, a near 1000% increase.  

CCUS remains a relatively nascent technology, as noted by the UN-convened Net Zero Asset Owner Alliance. While the Inevitable Policy Response’s (IPR) Forecast Policy Scenario projects technologies, including CCUS and direct air capture carbon capture and storage (DACCS), could account for over US$600 billion in revenues by 2050, it will require significant funding to be scaled up to assist with reducing emissions, even if the oil and gas industry scales down production. 

According to IEA’s report, should oil and natural gas consumption continue to evolve under current projections it would require an “inconceivable” 32 billion tonnes of carbon captured via CCUS by 2050 to limit the temperature rise to 1.5°C.  

This would include 23 billion tonnes of carbon captured using DACCS.  

Three reports recently issued by the IPR underlined the role policy and policymakers will need to play in ensuring DACCS is affordable and available at scale in the likely event of a 1.5°C overshoot. 

An analysis of cash flows in a 1.5°C scenario carried out by the IEA suggests that a “reasonable ambition” for the industry is for 50% of capital expenditures to go towards clean energy projects by 2030. This would be in addition to the investment needed to reduce Scope 1 and 2 emissions. 

The UK’s autumn statement confirmed £960 million (US$1.21 billion) of investment to accelerate the manufacture of green technologies and energies like offshore wind, hydrogen, nuclear, and CCUS. 

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