The IEA's Net Zero Emissions Scenario: NGW comments

It is quite the turnaround when the OECD watchdog, the International Energy Agency (IEA), calmly admits that the producers’ cartel OPEC will account for at least half the world’s oil production in 2050 – which would be a record high.

And yet the IEA head Fatih Birol, having considered the targets set by governments for their plans to meet the 2050 targets, said at a briefing that if the world wants to meet the net zero emissions goal, there is no need for further fossil fuel investments.

Set up at the time of the oil supply shocks of the 1970s, the IEA’s broad aim has been to inform consumers about likely energy demand in the short and long term so that governments may prepare for the unexpected. And over that time OPEC’s share has diminished while other resource holders have expanded output: the US is the biggest of these.

Renewable energy and other means of fuelling the world will spread into more sectors of the global economy. Holding the lowest cost oil in the world, the Middle East will be the last man standing, if the world is to meet its net zero emissions targets.

It is another turnaround if gas, far from being the transition fuel, is seen as much a part of the problem as oil and even coal. The IEA has repeatedly said that gas is uniquely able to balance renewable electricity supply; its developers also say it displaces diesel and biomass in many regions, eliminating particulates and improving the populations’ health and wealth.

But now, “no new natural gas fields are needed in the Net Zero Emissions scenario beyond those already under development," the IEA said. "Also not needed are many of the LNG liquefaction facilities currently under construction or at the planning stage."

It considered all the inputs – government and policy-makers' plans to reduce emissions based on firm national commitments – in conjunction with its own extensive energy data.

Of course money will keep flowing upstream for decades. None of the international oil companies are planning to stop exploring for new oil and gas reserves to backfill production or meet new demand, even as they expand their renewable energy operations. It would also pull the rug from under some of the world’s shakier economies, which rely on oil and gas exports, causing huge social unrest; and violate contracts that would lead to colossal financial losses.

Further, there are governments that have committed to keep their oil and gas industries going, recognising that the tax revenues and jobs are essential to investing and developing new kinds of zero carbon energy, such as carbon capture and storage (CCS). The IEA has often said that CCS is an essential part of any serious reduction in greenhouse gas emissions. Those projects are now – finally – within a few years of implementation: Norway and the UK have several between them that could be operational at full late this decade.

The UK, which has a strong commitment to net zero, has also said that indigenous oil and gas production will be key to net zero, although the regulators are making the rules on emissions offshore tougher. By contrast, those governments that have banned new licences outright, such as Denmark, Ireland and Spain, are not depriving themselves of much oil and gas production.

Australia’s upstream lobby group APPEA came out with a pointed response the same day as the IEA’s report: it said the Australian oil and gas industry is at the forefront of new energy technologies such as CCS and hydrogen. Australian LNG exports are already helping Asian countries reduce their emissions and this opportunity will continue. "The Australian government estimates that our exports of LNG help reduce emissions in importing countries by about 170mn metric tons each year — the equivalent of almost one-third of Australia’s total annual emissions.”

But there is a possibility that the IEA, which has given such prominence to its report, and which plans to include the NZE in future editions of its "bible" – the annual World Energy Outlook, essential bed-time reading for energy ministers the world over –  has a very simple objective: to point out the gap between the reality and the dream.

Many countries have raised the targets for their own ambitions – either individually, such as the UK; or in groups such as the EU – pushing themselves into costlier replacements for fossil fuels. The soaring price of carbon emissions certificates, which has more than doubled in the EU in the last six months, mean higher bills for the population.

Seen in that light, this new report is not a suggestion to halt upstream operations now, but a challenge for governments to be prepared to put their money where their mouths are.