According to IEA, the global oil and gas industry encompasses a large and diverse range of players: from small, specialised operators to huge national oil companies. These producers face pivotal choices about their role in the global energy system amid a worsening climate crisis fuelled in large part by their core products.
The Oil and Gas Industry in Net Zero Transitions analyses the implications and opportunities for the industry that would arise from stronger international efforts to reach energy and climate targets.
Furthermore, this report explores the outlook for oil and natural gas producers in net zero transitions. Oil and gas account for around half of today’s global energy supply, providing valuable energy services to consumers around the world but also resulting in over 18 Gt CO2 emissions. Some of the services provided by oil and gas can be replaced with relative ease by clean energy technologies, as witnessed by the rise of electric vehicles (EVs) and renewable sources of power generation.
The oil and gas industry today
- Majors are large companies listed on stock markets in the United States and Europe. They have historically focused on developing large, capital-intensive projects and their upstream divisions represent most of their financial value and revenue. In this report, this group comprises seven companies: BP, ConocoPhillips, Chevron, Eni, ExxonMobil, Shell, and TotalEnergies.
- Independents are smaller fully integrated companies or independent upstream operators. They encompass a wide range of companies, such as Lukoil, Repsol, OMV and Woodside, as well as many North American companies – including shale gas and tight oil players – such as Apache, Hess, Marathon Oil, Pioneer Natural Resources and Oxy, and diversified international conglomerates with upstream activities, such as Mitsubishi Corp.
- National oil companies (NOCs) have been given mandates by their home governments to exploit national resources and have a legally defined role in upstream development. While some NOCs operate outside their home country and are also active downstream, the bulk of their assets are based in their home country’s upstream operations. Most of the largest NOCs are located in the Middle East, such as Saudi Aramco, National Iranian Oil Company, Kuwait Petroleum Corporation, Abu Dhabi National Oil Company and QatarEnergy. There are also NOCs in Eurasia, including in Russia, in Latin America and many parts of Africa and Asia.
- International national oil companies (INOCs) share similarities with NOCs in their ownership and governance, but have substantial upstream investments outside their home country. This is usually done in collaboration with host NOCs or private companies. Some INOCs are also major players in the global gas markets. They include Equinor, China National Petroleum Corporation, Gazprom, Petronas and India’s Oil and Natural Gas Corporation.
Oil
Global oil demand increased by just over 1 mb/d on average each year between 2010 and 2019. The Covid-19 pandemic caused a 9 mb/d drop in oil demand in 2020, the largest annual drop in history, but demand has since rebounded and it stood at 96.5 mb/d in 2022. Oil provides a large range of the energy service demands required by society, including, for example, about 25 trillion passenger kilometres in cars, 30 trillion tonne kilometres for trucks, 320 million tonnes of high-value chemicals, and many other outputs. In the STEPS, oil demand reaches a maximum level of 102 mb/d in the late 2020s before declining to 97 mb/d in 2050. There are large declines in oil use in cars, buildings and power generation, although most of this is offset by growth in oil use in trucks, aviation and
petrochemicals.
Natural gas
Natural gas markets were upended by Russia’s invasion of Ukraine. The sharp reduction in pipeline supply to Europe tightened global gas markets, resulting in record high prices and a drop in global demand of around 1% in 2022. Europe registered a record 13% fall in natural gas demand. Aggregate demand in emerging markets in Asia, the past engine of global gas demand growth, fell for the first time ever, as the spikes in global prices shook confidence in gas as an affordable alternative to coal or oil. Prices have moderated in 2023 and are expected to come under downward pressure in the second half of the 2020s as a large new wave of LNG export facilities starts operation. There is still significant scope for demand growth this decade, notably in industry, despite the near-term risks brought about by the supply squeeze. Nonetheless, increasingly cost-competitive low-emissions options for power generation and heating – alongside increased climate ambitions among many emerging market and developing economies in Asia – raise major questions about the long-term outlook for natural gas demand.
