COP28’s Historic Deal Cements a Role for Big Oil’s Priorities

(Bloomberg) -- The historic COP28 deal, which committed the world to the transition away from fossil fuels, also cemented a role for two key oil industry priorities. 

The summit’s final text indicated that natural gas, a fossil fuel that’s somewhat less carbon-intensive than oil and coal, can play a part in cutting emissions. It also placed CO2 capture and storage alongside renewables and nuclear as key technologies that would drive the transition. 

These are areas where Big Oil has been making multibillion dollar bets, and whether they truly complement, or eventually undercut, the pledge for a lower-carbon world is still open to debate. For natural gas it’s largely a question of timing, and for CCS it’s a matter of technological progress. 

“We are not going to win the fight against the climate change if we continue to rely structurally on fossil fuels,” said Tinne Van der Straeten, the energy minister for Belgium which still relies on gas for almost a quarter of its electricity production. “Gas as a transition fuel means that you use it as short as possible.” 

Gas has been heralded by the industry as the cleanest fossil fuel since it releases less carbon dioxide than coal when combusted. However, in many regions it’s also responsible for rampant methane emissions, a greenhouse gas that’s 80 times more potent than CO2. The COP28 text included a pledge to reduce methane pollution to near zero by the end of decade, and has been widely endorsed by the fossil fuel industry.

Before the deal, there was already a long-running debate about the role of natural gas in the shift to clean energy. Corporate giants including Shell Plc and Woodside Energy Group Ltd. insist it has a role in providing secure long-term fuel supplies. They are making big investments in new projects to pump gas, which for many companies represents a growing share of their overall fossil fuel production. 

The fossil fuel industry had a big presence at the Dubai climate conference. The president of this year’s UN-sponsored summit, the United Arab Emirates’ Sultan Al Jaber, also runs the country’s oil company. He brokered an agreement that kept keeping Saudi Arabia and other oil producers on board. Major CEOs including Darren Woods of Exxon Mobil Corp. and Toby Rice of EQT Corp. were also in attendance. 

Some governments, such as Japan’s, also say that additional investment in gas is necessary to boost energy security, especially after Russia’s invasion of Ukraine last year sent prices of the fuel to a record high. Firms in Europe and Asia signed 27-year liquefied natural gas purchase agreements with Qatar over the last year. Critics argue that this threatens 2050 net zero targets.

The technology to capture and store CO2 is something oil companies have been employing for decades, mostly pumping the trapped gas back into the ground to extract more fossil fuel. Today, there’s increasing interest in using CCS to reduce the carbon intensity of products, such as cement and steel, and even suck CO2 directly out of the air.

Yet the large-scale economic viability of the technique remains unproven. For decades, the US has dedicated billions of dollars in federal government spending — both grants and tax credits — to propel carbon capture ventures at power plants and industrial facilities, but it has little to show for that largesse. Just 14 projects are operating today, with half of them tied to the very cheapest applications — gas processing and ethanol production — according to a database by the non-governmental organization Clean Air Task Force.

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