World's state-owned oil companies are 'betting on missing climate goals'

A worker collects a crude oil sample at an oil well operated by Venezuela's state oil company PDVSA in Morichal, Venezuela.
A worker collects a crude oil sample at an oil well operated by Venezuela's state oil company PDVSA in Morichal, Venezuela. REUTERS - CARLOS GARCIA RAWLINS

The world’s state oil companies risk wrecking the Paris climate goals by continuing to pour hundreds of billions of dollars into fossil fuel exploration projects, a report has warned.


A fifth of $1.9 trillion in investments over the next decade will fail to make money if countries succeed in reducing their carbon emissions to limit warming to “well below” 2 degrees Celsius, as per the Paris Agreement.

The Natural Resource Governance Institute (NRGI) think tank, which released the report, says this means governments are betting on a slower green energy transition. It’s a gamble that may see state oil companies, many in developing countries, squander some $400 billion in oil and gas projects.

The NRGI estimates that oil prices – now recovering after a slump during the pandemic – would need to be kept above $40 a barrel if countries are to avoid major net losses on their investments.

Furthermore, the failure of those investments could spark economic crises across the developing world that may require bailouts that will “cost the public dearly” and lead to greater inequalities, warns report co-author David Manley.

NRGI says its report “Risky Bet” is the first to weigh the “major implications” resulting from the spending plans of national oil companies who, it argues, would often be better off investing that money in education, healthcare and diversifying their economies.

Oil companies owned by African and Latin American countries, which have higher poverty rates, were assuming the biggest level of risk, the report found.


State-owned entities are not held to the same scrutiny as their publicly listed counterparts, even though they are economic giants that control at least $3 trillion in assets and produce about two-thirds of the world’s oil and gas.

Analysis published by the International Monetary Fund’s journal Finance and Development urged greater transparency in the governance of state oil companies, arguing they are not held to account for their management of vast public resources.

Just like their private counterparts, state oil companies should be made to assess and disclose their plans for the green energy transition, it said.

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