Risky Bet: National Oil Companies in the Energy Transition

  • Feb 2021
  • David Manley, Patrick Heller

KEY MESSAGES
• If national oil companies follow their current course, they will invest more than $400 billion in costly oil and gas projects that will only break even if humanity exceeds its emissions targets and allows the global temperature to rise more than 2oC.
• Either the world does what’s necessary to limit global warming, or national oil companies can profit from these investments. Both are not possible.
• State oil companies’ investments could pay off, or they could pave the way for economic crises across the emerging and developing world, and necessitate future bailouts that cost the public. Some oil-dependent gov- ernments in Africa, Latin America and Eurasia are making particularly risky bets with public money.
• Many national oil companies have incentives to continue spending big on new oil and gas projects. As a result, company officials might not, on their own, change course to account for the energy transition away from fossil fuels toward green energy, nor make investment decisions that serve the interests of citizens.
• Governments—through finance and planning ministries, presidential offices and public accountability bod- ies—must act to promote a more sustainable economic path. Governments should:
o Understand the extent of national oil companies’ exposure to a decline in oil and gas prices
o Revisit rules on cash flows into and out of state-owned companies
o Require or incentivize lower-risk investment decisions
o Benchmark and measure national oil company performance, improve corporate governance, and report
consistently to citizens

You can access the full report in the link below. The executive summary is available here.

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