Oil & Gas

‘Oil will still be needed’ – producers react to Cop28

December 14, 2023

‘Does not affect ability to sell’
‘Reinforces transition strategy’
Oil to remain ‘pillar’ of energy security

Saudi Arabia’s energy minister said the final Cop28 deal would not affect the kingdom’s oil and gas exports, as the fossil fuels sector reacted to being included in the climate change conference’s final wording for the first time in its three-decade history.

“The text provides alternatives. But I think these texts do not affect our exports, do not affect our ability to sell,” Prince Abdulaziz bin Salman told Saudi-owned Al Arabiya television on Wednesday.

The hard-fought UN-led Cop28 agreement calls for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner … so as to achieve net zero by 2050 in keeping with the science”.

The text was adopted after heated negotiations, with a language that replaced the explicit call for a “phase out” of fossil fuels, a central point of contention throughout the talks.

The previous reference to “reducing both consumption and production” of fossil fuels met strong resistance from oil and gas producers, including Saudi Arabia, Iraq, Iran, Russia, Oman, and China.

Several oil and gas industry players have welcomed the Cop28 agreement reached in Dubai.

TotalEnergies told AGBI: “This agreement reinforces TotalEnergies’ transition strategy, which aims, on the one hand, to contribute to the construction of a new, more efficient low-carbon energy system based on electricity and renewable energies, in which gas plays a useful role as flexible transition energy.”

It also noted “with interest, the mention of the usefulness of transition fuels such as gas”. Gas emits CO2 into the atmosphere, but is seen as an alternative to coal or oil.

The oldest private UAE oil and gas company, Crescent Petroleum, also welcomed the Cop28 wording.

“The UAE consensus is a historic step for the world that recognises the importance of achieving the energy trilemma of affordability and availability as well as sustainability,” CEO Majid Jafar said.

“Oil will still be needed to make everything the transition relies upon, from solar panels to wind turbines to electric cars.”

The Emirati company also noted the importance of natural gas replacing coal and liquid fuels for power, and enabling intermittent renewables is the fastest way to reduce emissions from electricity in the developing world.

Italy’s ENI said a strong commitment to renewable energies and energy efficiency was crucial: “For the first time, the final agreement expresses the need to balance emission targets, energy security, access to energy, and competitive development.”

TotalEnergies added that doubling energy efficiency by 2030 is also essential and it supports the objective to eliminate the majority of methane emissions by this date.

Its CEO Patrick Pouyanné was part of the official Cop28 French delegation. He backed the international pledge to triple renewable energy generation during the conference.

‘Decades to come’

But for some Arab oil producers, oil and gas will remain “pillars of global energy for many decades to come,” the Arab energy ministers said in its closing statement on Tuesday, following its meeting in Doha.

The conference recommended measures to develop fossil fuels and national energy companies. It also suggested working “to maintain production levels and work to provide additional production capacities.”

Iman Nasseri, managing director for the Middle East at consultancy Fact Global Energy, said the text is very much in line with the expectations.

“Targeting a phase-out of fossil fuels is not the right approach; it would contribute to higher cost of energy,” he said.

Omar al-Ubaydli, director of research at Bahrain Centre for Strategic International and Energy Studies, noted cautiously that the compliance rates of the Paris Agreement are not particularly impressive.

“My guess is that, after all the wrangling, fossil fuel-producing countries are banking on that fact,” he told a Gulf Intelligence energy podcast.

“As a consequence, what gets implemented could be quite far from what a superficial reading of the text implies.”