Energy giants are failing to prepare for a world with declining demand for oil and gas

2023 will be remembered as the hottest year on record, with floods, droughts, heatwaves, and wildfires occurring across the world. This clearly demonstrates the impact of climate change and the need to reduce carbon emissions.

But oil and gas companies are still pushing back on fossil fuel production at a time when we should be cutting production, often at odds with their own energy transition goals and climate change policies, according to a leading climate finance think tank. The company is reportedly rewarding executives for expansion.

In the new report, Crude Intentions IICarbon Tracker analyzed the compensation policies of 25 large publicly traded oil and gas companies and found that all but one (Occidental Petroleum) still encourage production expansion, suggesting demand for fossil fuels will continue to grow. It turned out that the company was operating on the premise that The energy transition continues to accelerate.

Growth in renewable energy, electric heat pumps and electric vehicles is booming around the world, and the International Energy Agency (IEA) predicts that even under current policies, demand for oil, coal and gas will peak by 2030. It is said that The IT sector has also warned that demand for fossil fuels remains too high to meet the Paris Agreement goal of limiting global average temperature rise to 1.5°C, and calls for stricter policies on fossil fuel use. This suggests that further restrictions may be in place. Method.

“It is increasingly likely that demand for each fossil fuel will peak by the end of the decade,” said Sidrasul Ashrafkanov, associate analyst at Carbon Tracker and author of the report. “For most oil and gas companies, this means planning for their production to decline over time, but following remuneration policies this generally does not seem to be in the plan. .”

Companies like BP, Chevron, ExxonMobil, and Total Energy are championing strategies built around transition but with incentives to expand production. In addition, several indicators that encourage “low carbon” investments drive the growth of “natural” gas, reflecting the promotion of gas as a “low carbon” or “transition” fuel, the think tank says. .

Researchers found that companies with the most ambitious climate change policies were among the worst offenders. Although companies such as Eni and Repsol have committed to cuts of 30-35% by 2030, production growth targets still determine 29% and 23% of executive salaries, respectively.

“The energy transition is accelerating and oil and gas companies need to plan for peak demand for their products. “We should be concerned that this continues to be encouraged, especially when this is contrary to corporate strategy,” said Mike Coffin, head of oil, gas and mining at Carbon Tracker. “Asset owners and asset managers should use their votes accordingly to ensure management is acting in their long-term best interests.”

The report found that state-run oil companies such as Saudi Aramco, Petrobras and Sinopec remain weak at disclosing compensation policies, while European companies are more likely than U.S. oil companies to encourage renewables and other forms of low-carbon energy. It is pointed out that there is a high possibility that

Ten of the 25 companies analyzed by Carbon Tracker had integrated energy transition-ready pay metrics, and all encouraged diversification into new business areas. Only five companies have incentive metrics that directly align with broader corporate goals for reducing emissions.

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