Western energy companies are usually the main suspects when criticism arises about the sector’s role in climate change. However, it turns out that there are also state-owned companies that are less influential but also dominate the industry.
A number of energy companies will be the center of attention at the UN Climate Summit which opens on Thursday (30/11) in Dubai. Moreover, COP28 President Sultan Al Jaber is also the head of ADNOC, the national oil and gas company of the United Arab Emirates.
The future of fossil fuels is at the heart of the two-week conference. The countries present are under pressure to agree to phasing out the use of oil, gas and coal to meet the Paris Agreement goal of limiting warming to 1.5 degrees Celsius.
“While attention often focuses on the role of the big companies, namely the seven major international players, they control less than 13 percent of global oil and gas production and reserves,” the International Energy Agency (IEA) said in a report last week.
Alice McGown holds a sign that says “no more fossils” while dressed as a mermaid at the UN Climate Summit COP28, Sunday, December 3, 2023, in Dubai, United Arab Emirates. (Photo: AP)
National oil companies “account for more than half of global production and almost 60 percent of the world’s oil and gas reserves,” the Paris-based agency added.
State-owned enterprises and major oil companies – including BP, Chevron, ExxonMobil, Shell and TotalEnergies – will all “play an important role in efforts to achieve net zero emissions” by 2050, the IEA said.
Giant national oil and gas companies include the world’s largest oil company Saudi Aramco, Rosneft from Russia, Chinese company CNOOC and Petrobras from Brazil.
Some companies explore resources in their own territories, while others, known as “international national oil companies”, conduct exploration abroad.
“These companies have very large-scale resources,” said Ben Cahill, senior fellow on climate and energy security at the Center for Strategic and International Studies (CSIS).
These countries also “generally have low production costs which means that they will likely continue producing oil for a long period of time because they have scale and cheap resources,” Cahill added.
Countries such as Saudi Arabia or Russia, have a big influence on world oil prices because they can lower or raise prices by coordinating production cuts through the OPEC+ alliance consisting of a number of major producing countries.
Their operations and products are major contributors to greenhouse gas emissions, but very few national companies are setting climate targets.
PetroChina Jilin Petrochemical Co. oil refinery in Jilin, northeastern China, Monday, May 24, 2004. (Photo: AP)
However, there are exceptions for large companies such as Saudi Aramco, ADNOC, PetroChina and Petrobras, because they have set carbon neutral targets by 2045 or 2050.
Only five of the world’s 21 state-owned companies “have publicly stated that they have a strategy regarding the energy transition and the need to mitigate related risks,” according to the Natural Resource Governance Institute (NRGI).
“In some oil-producing countries, the crop has so much political power that the oil industry doesn’t want electric vehicles on the road and they don’t want renewables competing with their gas,” said David Manley, principal economic analyst at NRGI.
A number of state-owned companies are also less sensitive to social pressures than Western countries which must be responsible for increasingly climate-conscious investors.
“Because they’re not listed on a stock exchange, they don’t have activist shareholders” on their boards, Manley said.
“Most of these companies are opaque. Very little information is published about these companies. So there is very little public or even government accountability for the state of these companies,” he said.
Nicolas Berghmans, an energy and climate expert at the Institute for Sustainable Development and International Relations think tank in Paris, said energy SOEs account for a large share of their countries’ revenues, even in countries with more diversified economies.
But the IEA predicts demand for fossil fuels will peak this decade due to “spectacular” growth in green energy technologies and electric cars.
“The prospect of declining demand for oil and gas adds a new dimension to the need for these countries to diversify their economies,” said Christophe McGlade, head of the energy supply unit at the IEA.
Tim Gould, IEA Chief Energy Economist, said it was a “non-negotiable element” for oil companies, including state-owned companies, to reduce emissions from their operations.
He said companies like Saudi Aramco or ADNOC “have a very important leadership role there, and they can really determine what’s possible, what’s on the agenda.” (ah/rs)