Paul Hodgson: Oil majors’ promises need a reality check

Under a headline “Shell amazed: ‘How can a sustainable company like Shell be hit so hard by an oil crisis?’”, the Dutch satirical publication De Speld puts words into the CEO of Shell’s mouth: “We have been investing an enormous pittance of our budget on sustainability for years,” says Shell CEO Ben van Beurden. “Then you expect our wafer-thin investment in sustainability to make you less dependent on the geopolitical whims of Russia and OPEC. I mean, we're only putting 94% of our investments in fossil energy. Actually, we expected our stock to rise this morning. How green should we become?”

It would be funny if it weren’t so true.

But Shell is not the only oil major to be doing a good job at green imaging and a terrible job at actually becoming sustainable. According to a new report from advocacy group Price of Oil/Oil Change, based on data from energy consultancy Rystad Energy: “None of the evaluated oil majors’ climate strategies, plans, and pledges come close to alignment with the Paris Agreement.” The report looks at the record and promises of BP, Chevron, Eni, Equinor, ExxonMobil, Repsol, Shell, and Total.

The report measures oil and gas company climate plans against 10 minimum criteria that they must meet to have the possibility of being 1.5°C-aligned. In a startling graphic, none of the oil majors are shown to have agreed to stop approving new extraction projects or to set a long-term phasing out of production of fossil fuels. None rely on carbon sequestration or offsets that are properly defined or disclosed, none are honest about the effects of fossil fuels and none have promised to end lobbying, though some have committed to reviewing their lobbying policies. And, finally, none have any transition plans. Most of these answers are bright red, which denotes ‘grossly insufficient’; only a few are orange, which is merely ‘insufficient’. There are no ‘fully aligned’ green answers.

“Each of them wants to remain a fossil fuel giant, only not look like one” – Mark van Baal

There are some yellow ‘partial alignment’ answers. BP committed to a 40% reduction in production by 2030 and a reduction in Scope 3 emissions, but with a major loophole, and Repsol has a close to absolute Scope 3 reduction, but most, if any, are reductions in intensity targets. However, BP’s actual reduction will be less than 30% because it excludes its joint venture with Russian oil and gas company Rosneft.

Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions are all other indirect emissions that occur, including both upstream and downstream emissions.

Commenting on the report, Mark van Baal of shareholder advocacy group Follow This, noted that some oil majors are promising to reduce their own production by 2030, but none of them is promising to reduce their overall emissions by 2030. “An oil major’s traded Scope 3 is typically two times its produced Scope 3,” he added.

“Almost all oil majors forecast increasing emissions by 2030, while all IPCC [Intergovernmental Panel on Climate Change] scenarios show that decreasing emissions by 2030 is imperative to have any chance to reach the goal of the Paris Agreement.”

Despite pledges to do otherwise, all of the majors, except Eni, will increase oil production –  sometimes significantly – by 2030, according to Rystad Energy’s figures. Ironically, given that it is a less damaging fuel, most oil majors are decreasing their gas production over the same period.

In its analysis of Rystad’s figures, the report notes that there is another path: “By stopping investments in new fields, stopping putting new reserves into production, and accelerating the phase-out of some existing production, oil and gas production would decline at a pace aligned with 1.5°C.”

“Many of them have their conditional Paris alignments by 2050,” said van Baal. “They all say we are Paris-aligned under ‘these conditions’. Shell says it will be net zero because it will approximately halve its emissions and its customers will do the other half. Equinor is the most shameless, saying it will be net zero on Scope 1 and 2 and if everyone does that there will be no Scope 3 anymore.” And, as the report points out, Total has set an absolute Scope 3 reduction target, but only for its European operations.

“Moreover,” added van Baal, “Shell always adds ‘in step with society’. We interpret this as ‘also consider a world that does not meet the Paris goals’. Fortunately, more and more investors do not want to consider a world that does not reach ‘Paris’ and therefore vote for our climate targets resolutions.”

The Oil Change report also cites another piece of research published in August this year by Unearthed, which showed a perception gap between BP’s public statements and its actual actions, between its commitments and outcomes. The report found that BP’s venture capital division has used money from a “low carbon transition” fund to invest in activities like using artificial intelligence to drill for more oil. “Of trackable investments,” the report says, “BP invested $95 million [€81 million] into companies that help find, extract or use fossil fuels, compared to putting $31.3 million into companies seeking to reduce fossil fuel use.”

“Pledges to reduce Scope 1 and 2 to zero, are like a tobacco producer saying all our employees will stop smoking but we’ll keep on selling cigarettes,” said van Baal. “Pledges on cutting produced Scope 3 is like Big Tobacco saying we will stop producing cigarettes but will keep on selling cigarettes produced by others.”

Van Baal also pointed out that his interpretation of these pledged production cuts looked like a response to the current oil price crisis, rather than a response to the climate crisis.

“Each of them wants to remain a fossil fuel giant, only not look like one,” said van Baal. “Apparently far more pressure from society and responsible investors is needed to make oil executives see the writing on the wall.”

The report is even more specific about who needs to be applying pressure: governments and financial institutions.