Oil and gas majors must cut production by a third or Paris Agreement fails


A new report by UK non-profit climate change think tank Carbon Tracker says the world’s listed oil and gas majors must cut combined production by 35% before 2040 to keep emissions within international climate targets and protect shareholder value.

At current rates of emissions, the total carbon budgets to limit temperature rise to 1.5˚C and 1.75˚C will be exceeded in 13 years and 24 years respectively. Yet, since 2011, global proved reserves of oil and gas have increased, and amount to some 50 years at current production.

Despite public statements to the contrary, none of the majors’ emissions targets are found to be aligned with the Paris Agreement.

In Balancing the budget: Why deflating the carbon bubble requires oil & gas companies to shrink Carbon Tracker analyses current and future projects to identify which would still be economic in a 1.6˚C world using the International Energy Agency’s Beyond 2 Degrees (B2DS) scenario, in line with the Paris commitment to limit global temperature rise to “well below” 2°C.

Building on previous work the report extends the concept of the global carbon emissions budget to the company level using new project-level emissions data from Rystad Energy to set out ‘company carbon budgets’.

Mike Coffin, oil and gas analyst at Carbon Tracker, and the author of the report said: “If companies and governments attempt to develop all their oil and gas reserves, either the world will miss its climate targets or assets will become “stranded” in the energy transition, or both. The industry is trying to have its cake and eat it — reassuring shareholders and appearing supportive of Paris, while still producing more fossil fuels. This analysis shows that if companies really want to both mitigate financial risk and be part of the climate solution, they must shrink production.”

The report found that whilst fossil-fuel majors need to meet or exceed the 35% target, the picture differs widely between companies depending on the proportion of low-cost, low-carbon projects in their portfolio.

In that same vein, it also warns that other fossil fuel producers, especially those with undiversified portfolios, may need to make much deeper cuts.

The main findings from the report are:

  • None of the majors are on-track to be aligned with Paris by 2040;
  • ConocoPhillips faces the biggest production cuts of 85%;
  • ExxonMobil, the biggest oil major, would need cuts of 55%;
  • Eni requires cuts of 40%, Chevron and Total both 35%, and BP 25%;
  • Shell’s portfolio is most aligned but it would still need cuts of 10%.

Exxon, Total and Conoco have few low-cost, low-carbon project options that would be economic in a 1.6˚C world. A quarter of ConocoPhillips’ production is from rapidly declining shale/tight oil and it has few sufficiently competitive projects to replace this production within a B2DS budget. This is also a factor in the declining production for ExxonMobil and Chevron.

The report warns that oil projects already approved are almost sufficient to meet demand in a 1.6˚C world with little headroom for new fossil fuel projects.

“Only Shell, Total and Repsol have targets which include the “Scope 3” emissions created by burning their products, which account for the vast majority of CO2 related to fossil fuel use.

“While an improvement on many peers, they have only pledged to reduce the carbon intensity of the energy they produce, which means they can continue to grow fossil fuel production — increasing CO2 emissions overall and leaving open the risk of stranded assets. Our climate system works on finite limits, so strategies that allow infinite growth are a square peg in a round hole.”

Mark Fulton, chair of Carbon Tracker’s Research Council said: “Our Breaking the Habit work shows the amount of CAPEX consistent with achieving “well below” 2˚C.

“Based on the same project-level analysis we can express this in terms of a carbon budget with associated production levels. This, therefore, gives a comprehensive picture with consistent metrics that can be factored into company planning.“

Investors and civil society groups are pressing companies to be much more transparent about their spending plans and drop projects that are not climate-friendly. The company carbon budgets in this report can be used to support investors and fossil fuel companies in setting targets.

Carbon Tracker’s analysis to date has argued that it is in shareholders’ best interests for fossil fuel companies to restrict investment in new production to only the most competitive projects.

Focusing on low-cost, low-carbon projects results in portfolios that generate industry-leading returns and minimises the risk of stranding in the low-carbon transition. Yet most companies are pumping and reinvesting as normal, despite investors clamouring for change.


Andrew Grant, Senior Oil and Gas Analyst and co-author of the report, noted “The majors have set out a range of emissions targets and ambitions in response to investor pressure, but none has committed to an absolute cap on full-lifecycle emissions and the production limits that are necessary to align with Paris. Additionally, company targets often only apply to the portion of production they actually operate.”

  • Read more on decarbonisation here
  • Read more on the global energy transition here

Carbon Tracker warns investors that before companies can claim to be aligned with the 2050 Paris Agreement targets, they must at a minimum reflect absolute climate limits, not intensity targets; cover emissions from their own operations and from use of their products, and cover emissions from the vast majority of the company’s owned production.

The analysis also warns that company carbon budgets assume levels of carbon capture and storage that may not be realised in the timeframe. Consequently, “they represent the minimum reduction in carbon emissions that companies must achieve, and we encourage companies to go further.”

“In our first 2011 report, Unburnable Carbon: Are the world’s financial markets carrying a Carbon Bubble? we highlighted the finite global carbon budget and the risks from excess supply of fossil fuels. Carbon Tracker has been consistent in finding most fossil fuels must remain in the ground. Yet as this new report highlights, companies and the governments that grant them their licences are still intent on expansion.” said Mark Campanale, Carbon Tracker’s founder and executive director