In this list
Agriculture | Coal | Electric Power | Energy Transition | Natural Gas | Oil | Petrochemicals | Shipping

ANALYSIS: COP26 cranks up pressure on oil, gas despite dodging closer scrutiny

Commodities | Energy | Oil | Crude Oil | Refined Products | Jet Fuel

Jet fuel values buck falling passenger trend

Energy | Oil | Refined Products | Jet Fuel

Platts Jet Fuel

Energy Transition | Renewables | LNG | Coronavirus

Asia Energy Transition Conference

Energy | Natural Gas | Petrochemicals | Metals | Steel

Iran's oil minister asks for nation's 'cooperation' after gas demand hit record high

Energy | Electric Power | Energy Transition | Hydrogen | Natural Gas | Natural Gas (European)

Insight from Moscow: Russia aiming to take major role in global hydrogen markets

ANALYSIS: COP26 cranks up pressure on oil, gas despite dodging closer scrutiny


Major emissions gap still existing to hit net-zero

Accords to boost SAF update, EV sales

Carbon abatement costs already rising

The global oil and gas industry emerged largely unruffled by specific pledges at the COP26 climate summit, but big oil and gas producers and demand for their fuels were firmly in the sights of pacts seeking a faster transition to cleaner energy at the pivotal Glasgow event.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Dubbed a "wake-up call" by OPEC Secretary-General Mohammad Barkindo, the two-week climate talks formally recognized the need to put an end to fossil fuels, even if there were no decisive plans to achieve that aim.

After last-minute interventions by India and China, the pacts call for the "phasing down," rather than "phasing out" of "unabated coal power" as well as "inefficient subsidies" for the industry.

While the US and EU strongly backed the inclusion of language on phasing out fossil fuel subsidies and coal-fired power, it was resisted by some major fossil fuel producers.

South Africa and Nigeria, which are heavily dependent on coal and oil respectively, objected to a simple aim to end fossil fuels subsidies.

Extended in the form of direct subsidies, fiscal incentives, price regulation and other government support, the International Energy Agency estimates fossil subsidies amounted to $180 billion globally in 2020.

India pointed to its subsidies for LPG to low-income households that mitigates pollution from burning biomass.

Nevertheless, COP26 optimists said the 2015 Paris Agreement does not even mention fossil fuels that generate some 90% of human CO2 emissions.

That's still a long way from a roadmap to hitting Paris climate targets. Global oil demand alone would need to collapse by 75% over the next three decades to put the world on a pathway to net-zero emissions by 2050, according to the IEA.

Global coal, oil and gas production and demand would have to start declining "immediately" to hit the 1.5 C target, with just coal and oil needing to fall from today to hit the 2 C target, the UN said in a recent report.

Oil, gas phase-out

One major potential accelerant to global energy transition and carbon reduction hopes is India's long-awaited national 2070 net-zero target. The world's third-biggest oil importer and consumer imports more than 80% of its oil and is a key driver for global oil demand growth.

But most of India's emission reductions would likely come from clean coals project with carbon capture rather than a collapse in oil demand. The country's oil demand will rise to 7.1 million b/d by 2030 from 5 million b/d in 2019, under the IEA's reference case scenario.

The event also saw the official launch of the Beyond Oil and Gas Alliance, an initiative by Denmark and Costa Rica to spur a global phase out of oil and gas.

Set up earlier this year to raise pressure on oil and gas producers, BOGA was joined by France, Greenland, Ireland, Sweden, Wales and the Canadian province of Quebec. California and New Zealand signed on as associate members, committed to taking "concrete steps'' to reduce oil and gas production.

Denmark, which has seen its North Sea oil and gas production fall to 100,000 b/d of oil equivalent after peaking in 2004, has already banned new exploration and committed to ending production by 2050. While other small producers may join the cause, producers with more at stake are unlikely to commit.

COP26's hosts the UK, which pumps around 1.6 million boe/d, already declined to sign up saying it could not commit to phasing out the energy sources entirely.

SAF boost, EVs

The climate talks saw progress on accelerating alternative aviation fuels and boosting electric car sales.

The Sustainable Aviation Buyers Alliance, which aims to pool the purchasing power of fuel buyers to encourage policy support, opened to new members for the first time. 80 signatories -- both airlines and large travel buyers -- committed to boosting the use of sustainable aviation fuel, or SAF, to 10% of global jet fuel demand by 2030.

The European Commission has proposed a 5% blending mandate for SAF in the trade bloc by 2030, with this share growing to 63% by 2050. The move accelerated a push by refiners to boost SAF production that is sold at a significant premium to regular jet fuel, making it costly for airlines. SAF currently accounts for just about 0.01% of total aviation fuel demand in Europe.

The event also saw a declaration on zero-emissions cars and vans, committing signatories to work toward 100% zero-emissions vehicle sales by 2035 at the latest in leading markets, and by 2040 globally.

But the non-binding agreement largely fell short of expectations, with China, the US and Germany, and a clutch of major automakers all failing to sign the accord.

Separately, however, the UK confirmed plans to end the sale of all new diesel trucks between 2035 and 2040, in what Belgium-based clean transport lobby group Transport & Environment, described as a "world-leading policy" that "places the UK at the head of the queue for ending the use of fossil fuels in vehicles by 2050."

The move will see the UK becoming the first country in the world to commit to phasing out new, non-zero emissions heavy goods vehicles weighing 26 mt and under by 2035, with all new HGVs sold in the UK to be zero-emission by 2040.

Shipping fuels

In the global shipping sector, which accounts for 3% of global CO2 combustion emissions, more than 20 countries including the US, Japan, Australia and Canada signed the Clydebank Declaration during COP26 to develop at least six green shipping corridors between two or more ports by 2025. With battery power seen as a limited solution for massive ships, the choices for alternatives to bunker fuel are green methanol, liquid hydrogen and ammonia.

Amazon, Ikea, Michelin, Unilever and Patagonia were among demand-side participants to commit to buying only zero-carbon freight from 2040.

The IMO is currently targeting a 50% cut in greenhouse gas emissions from the global fleet by 2050 compared with 2008 levels, following a 40% reduction in carbon intensity by 2030, but there is growing industry and political pressure to raise the 50% goal to 100%.

COP26 also made strides on raising the future carbon abatement costs for producing fossil fuels, a factor increasingly weighing on producers as they look to market net-zero oil or emission-free gas.

Calls at COP26 for greater scrutiny over the quality of voluntary carbon offsets have already raised the cost of offsetting oil and gas production with carbon credits.

CORSIA-eligible carbon credit prices have jumped 944% this year and were assessed at $8.35/mt CO2e at the close Nov. 12, according to S&P Global Platts assessments, compared with 80 cents/mt when the assessment was launched Jan. 4.