Transition away from fossil fuels? Big Oil has other ideas

London (CNN) — Is this the beginning of the end of the fossil fuel era? The world’s latest climate deal could be that milestone. But recent events show the oil and gas industry still has a very different vision of the future.

Following marathon talks, the COP28 climate summit in Dubai struck a deal Wednesday that makes the unprecedented call for “transitioning away from fossil fuels.”

Some countries, including the United States, welcomed the firmest-ever commitment to moving away from energy sources responsible for most planet-heating emissions, but critics were quick to point out that the agreement falls far short of requiring the world to “phase-out” oil, coal and gas, a position more than 100 nations had supported.

“The resolution is marred by loopholes that offer the fossil fuel industry numerous escape routes,” said Harjeet Singh, the head of global political strategy at nonprofit Climate Action Network International.

However vague or watered down the language, the deal looks out of touch with reality.

US oil production is at a record; India plans to double coal output by 2030; the UK is issuing new drilling licences in the North Sea; and American oil majors are splurging billions on deals that signal they see robust demand for decades to come.

“Anything less than a systematic transformation of the fossil fuel industry would be at odds with COP28’s deal,” said Daniel Klier, the CEO of ESG Book, a provider of sustainability data on companies. “The reality is no single climate summit can single-handedly drive the transition away from fossil fuels, let alone a phase out.”

The latest evidence of the industry doubling down on fossil fuels came Monday, when Occidental Petroleum said it would pay $12 billion in cash and stock to buy US shale oil producer CrownRock.

It followed ExxonMobil’s (XOM) October announcement of a $60 billion deal to acquire shale driller Pioneer Natural Resources, and Chevron’s (CVX) agreement less than two weeks later to buy shale producer Hess for $53 billion. Hess (HES) also has large oil assets in Guyana, which Chevron said would help grow its production over the next decade.

Another $50-billion oil and gas deal could take shape soon, this time in Australia. Woodside Energy and Santos are talking about a merger that would create one of the world’s biggest exporters of liquified natural gas (LNG) in a clear bet on continued strong demand from Asia for the fuel.

“Markets aren’t functioning properly and are rewarding the wrong companies … If anything, our future depends on markets rewarding those oil companies that are decarbonising at pace,” said ESG Book’s Klier.

But cash-rich oil giants are taking advantage of recent windfall profits to snap up lower-cost assets and boost shareholder returns, while directing much less investment to renewable energy.

The industry invested just $20 billion in clean energy projects last year — only around 2.5% of its total capital spending, according to the International Energy Agency (IEA).

The Paris-based agency says that share would need to shoot up to 50% by 2030 to help keep global warming to 1.5 degrees Celsius above preindustrial levels — a limit scientists say is crucial to avoid a significant worsening in the effects of climate change, including extreme flooding, drought, wildfires and food shortages.

The recent flurry of deals offers little hope that oil and gas firms are planning radical changes to how they spend their cash, even though that is what is urgently needed.

“With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible,” IEA executive director Fatih Birol said in a statement last month ahead of the climate summit. “The oil and gas industry is facing a moment of truth at COP28 in Dubai.”

On Wednesday, Birol struck a more sanguine note. “I congratulate the #COP28 Presidency & countries for this major outcome that clearly states the goal of transitioning away from fossil fuels in line with 1.5C,” he posted to X.

The IEA did not respond to CNN’s request for comment, beyond Birol’s remark, on how the deal stacks up with what is unfolding on the ground, which is clearly at odds with its previous calls for a stop to all new investment in oil and gas projects. The agency said Sunday that the world is still off-track to limit global warming to the crucial 1.5-degree threshold, despite pollution-slashing pledges made by dozens of countries at COP28. It thinks global demand for oil, gas and coal is likely to peak by 2030.

Even Europe’s oil giants, including Shell (SHEL) and BP (BP), which have a better track record on renewable energy investment than their US rivals, are still channeling billions towards fossil fuels. Earlier this year, BP backed away from climate targets it set three years ago, curbing ambitious cuts to carbon emissions and oil and gas production.

Oil and gas companies operating in Norway, western Europe’s largest producer, are planning to invest 240 billion Norwegian crowns ($21.85 billion) in 2024 — 9% up on this year and nearly a quarter more than previously expected, Reuters reported — citing a survey from industry group Offshore Norway.

Elsewhere, the United Kingdom committed earlier this year to granting “hundreds” of new licenses to enable companies to drill for oil and gas in the North Sea.

Much bigger oil and gas producing nations also look to be heading in the wrong direction. In a joint statement Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and the Gas Exporting Countries Forum (GEPC) — groups that include the United Arab Emirates, host of COP28 — welcomed the “consensual and positive” outcome reached in Dubai but stressed that “continued investment in oil and natural gas is essential.”

A recent United Nations Environment Programme report found that the world’s fossil fuel production in 2030 is set to be more than twice the amount needed to limit the global temperature rise to 1.5 degrees.

One of the major contributors to that disastrous overshoot will be India, which is burning ever greater amounts of coal and oil as it tries to meet the needs of its 1.4 billion people. It plans to double domestic coal production by 2030, even as it also sets ambitious targets for renewable energy.

In perhaps the clearest sign yet that the world’s latest climate deal will do little to reshape the future for fossil fuel producers, Saudi Arabia — the world’s biggest oil exporter and OPEC kingpin — welcomed it.

Energy Minister Prince Abdulaziz bin Salman told state-owned news outlet Al Arabiya that the COP28 deal would not affect the Kingdom’s hydrocarbon exports.

“The text, it provides alternatives,” he said.

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