The 27th Conference of the Parties (COP27) is underway in Sharm El-Sheikh,
Europe’s energy crisis due to Russia’s invasion of Ukraine has disrupted the goals set out at last year’s event, COP26. The European Investment Bank and more than a dozen European countries pledged in Glasgow to stop funding fossil fuel projects abroad, but now Europe is looking out for new gas supplies and supporting the development of its domestic oil reserves.
This has led to allegations of climate hypocrisy on the part of European countries, and will do little to help settle an industry that is already on uncertain ground.
Since COP26 in Glasgow, the price of oil has risen by 16% and since then, gas prices have doubled. This has incentivised global investor interest in oil and gas stocks, leaving other sectors behind.
This has helped the value of world’s oil majors. The share price of Shell increased by 47% and ExxonMobil by 72%, and on 1 November, BP announced that underlying profits more than doubled to $8.2bn in the third quarter of 2022, making it one of the company’s most profitable years.
At the same time, Philips 66 reported $5.4bn in earnings, compared to revenues of $3.2bn in the second quarter. Saudi Aramco also joined the big profit pool with net income increasing to $42.4bn. This compares to $30.4bn over the same period in the previous year.
COP27 for oil and gas
According to Small Caps, an investment market company in the UK, the 12-day conference will not change market realities, despite the rampant economic excesses of some industry majors. Still, it will likely enable governments to levy heavy taxes on what are seen as windfall gains from the Ukraine war. It said that higher taxes on oil and gas would directly contribute to inflation, which governments are attempting to combat with higher interest rates.
Countries are expected to demonstrate how they intend to implement the Glasgow pact call, as well as to review their climate plans and develop a mitigation work programme. This entails presenting more ambitious 2030 emissions targets, as the UN Climate Change Organization has stated that current methods are insufficient to avoid catastrophic warming.
According to Centre for International Environmental Law, high-emitting European countries are looking for new sources of fossil fuels, such as accords with the COP27 host country, Egypt, as well as Senegal and Israel. It said that other countries are considering alliances with authoritarian governments willing to overlook their human rights records in exchange for expanded fossil fuel exports.
In the events description, COP27 will discuss decarbonisation on 11 November, shifting the focus from zero-carbon economy to low-carbon economy. The International Energy Agency proposes that countries like Algeria, Egypt, Russia and Iraq, to name a few, commit to minimising the effects of cost of living crisis by adopting early energy transition.
“The expertise of the oil and natural gas industry fits well with technologies such as hydrogen, [carbon capture and storage] and offshore wind,” it said.
Tackling climate change
At the Gas Exporting Countries Forum (GECF) on 2 November, the 17 ministers and civil servants concluded that “COP27 and COP28 (in UAE) present a great opportunity to make a case for gas in the energy transition.”
The meeting focused on the GECF’s goal of assisting its member nations in maintaining their autonomy over their natural resources and their capacity to plan independently. This could help them manage the sustainable and effective use and conservation of natural gas resources for the benefit of their citizens, including through unrestricted cooperation with neighbours.
However, it remains to be seen if the increased attention on natural gas among the COP’s delegates will dissuade investment in and conversation surrounding cleaner fuels, such as renewables.
According to the UN, changes in climate mitigation refer to efforts to reduce or prevent greenhouse gas emissions. Mitigation can include using new technologies and renewable energy sources, making older equipment more energy efficient, or changing management practices or consumer behaviour.
According to Wood Mckenzie, , the forum members have pledged to cooperate to the carbon capture and storage process, according to climate change news. Governments around the world are not on track to meet the 1.5°C objective or to reduce gas consumption at the rate required to meet 1.5°C, it says.
According to the United Nations Framework Convention on Climate Change, national promises will cause temperatures to climb by 2.5°C
Tarek El Molla, minister of petroleum and mineral resources of Egypt said in Cairo: “As the cleanest hydrocarbon fuel, natural gas is seen as the perfect solution that strikes the right balance, and will continue to play a key role in the future energy mix. Egypt is eager to work closely with all GECF members to develop applicable and realistic initiatives that ensure both energy security and a just energy transition pathway.”