The good news is that the oil and gas sector "is well placed to scale up some crucial technologies for clean energy transitions," with expertise and resources in hydrogen, carbon capture, offshore wind and liquid biofuels, according to The Oil and Gas Industry in Net Zero Transitions report.
Released in advance of the 28th United Nations Climate Change Conference, the report looks at how the global oil and gas sector could align operations with the goals of the Paris Agreement and contribute to the new energy economy.
IEA projects that global demand for oil and gas will peak by 2030, and if governments fully meet energy and climate pledges, demand will fall 45% by 2050. To reach net zero emissions by 2050, oil and gas use would have to decline 75% or more by then.
The oil and gas sector accounts for more than half of global energy supply but just 1% of clean energy investment globally, according to the IEA report, which said 60% of those investments are from just four companies.
Some investment in oil and gas supply is needed to ensure the security of energy supply and provide fuel for sectors where emissions are harder to abate, the report said.
"The oil and gas industry is facing a moment of truth at COP28 in Dubai," IEA Executive Director Fatih Birol said in a statement on the report, which he said shows "a fair and feasible way forward in which oil and gas companies take a real stake in the clean energy economy while helping the world avoid the most severe impacts of climate change."
The report calls for oil and gas companies to have a transition strategy that includes reducing emissions from their own operations, which account for nearly 15% of global energy-related greenhouse emissions collectively. That would need industry emissions to decline by 60% by 2030, the report said.
In 2022, the oil and gas industry invested around $20 billion in clean energy, roughly 2.5% of its total capital spending That would need to increase to 50% by 2030 to align with the aims of the Paris Agreement, in addition to investments required to reduce their own emissions, the report said.
While many oil and gas companies focus on carbon capture, that will not address the challenge, in part because the electricity needed for those technologies would exceed current demand, the report said.
"Clean energy progress will continue with or without oil and gas producers. However, the journey to net zero emissions will be more costly, and harder to navigate, if the sector is not on board," Birol said.
The outlook for clean energy technology manufacturing projects to help with the energy transition is "mixed," according to an IEA Nov. 24 snapshot. Its Special Briefing on the State of Clean Technology Manufacturing looks at recent progress in clean energy technology manufacturing for five key technologies — solar PV, wind, batteries, electrolysers and heat pumps — that will be critical to the energy transition, with a focus on supply chains.
Commitments to clean energy technology in the second and third quarters of 2023 account for nearly 40% of the total announced manufacturing capacity for solar photovoltaic, 10% for batteries, and 20% for electrolyzers. While Solar PV and battery manufacturing are on track for 2030 milestones for the IEA's 2050 net-zero scenario and electrolyzer manufacturing could meet deployment needs if all projects come to fruition, wind energy component manufacturing has been limited and heat pump manufacturing capacity has dropped since 2022, the briefing found.