The Key Role of No-Carbon National Oil Companies in Global Climate Action: Leveraging The G20 Forum to Accelerate Energy Transition

Abstract

The energy sector is the single largest source of CO2 emissions and reducing its carbon intensity is critical to effectively tackling climate change. A great and yet largely untapped potential to reduce its emissions lies with oil and gas companies. Cognizant of this potential, in recent years several international oil companies (IOCs), publicly traded organizations with large capital access and wide geographical reach, have looked to effectively reduce their carbon intensity by shifting their operations to non-core low- carbon energy development. In addition to bringing about positive climate-driven outcomes, the IOCs that have embraced this energy transition strive to leverage business opportunities presented by political and social environments which are progressively more aware of the energy sector’s contributions to climate change. As much as this paradigm shift has sparked great interest by an increasing number of stakeholders in the energy sector, most national oil companies (NOCs) are notoriously absent. In comparison to IOCs, not only do NOCs dominate the global oil and gas industry, but they typically enjoy more favourable industry conditions, as they benefit from improved capital access and governmental support. This is because their overall value proposition, business strategies and budgets are interlinked with, or heavily influenced by, government policies. Under a mutable business environment which favours the development of energy resources with low- or zero-carbon content, it is reasonable to anticipate that national governments will become more determined to join the energy transition through their NOCs for two main reasons: meeting their national targets under global emissions reductions commitments while sustaining shareholder value. Moreover, given the complex efforts and resources in carrying out decarbonization at a pace and scale that effectively helps mitigate climate change, it is more likely that the world will enter a stronger decarbonization pathway if the largest economies and their NOCs fully embrace such an initiative. The implementation of this initiative at a truly deep scale would eventually allow NOCs in these economies to transform themselves into no-carbon NOCs (No-C NOCs) that would strive for socially accountable sustainable growth, higher economic value and meaningful contributions in the global fight against climate change. This paper analyzes these issues and advances a proposal for the G20, which combines some of the largest oil and gas producer and consumer economies.