The major oil and gas producers must cut combined production by a third by 2040 to keep emissions within international climate targets and protect shareholder value, Carbon Tracker finds in a report today.

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 1.6C 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” 2C.

The report finds that the majors would need to cut group production by 35 per cent by 2040 to align with this goal but the picture differs widely between companies depending on the proportion of low-cost, low-carbon projects in their portfolio.

The main findings from our modelling are:
• None of the majors are on track to be aligned with Paris by 2040;
• ConocoPhillips faces the biggest production cuts of 85 per cent;
• ExxonMobil would need cuts of 55 per cent, Eni requires cuts of 40 per cent, Chevron and Total both 35per cent, and BP 25 per cent;
• Shell’s portfolio is most aligned but it would still need cuts of 10 per cent.

To have any chance of reducing warming to “well below” 2C or to “pursue efforts” to hit the ultimate Paris target of 1.5C, cuts will have to be made across industry; after all, the majors alone represent a minority of global production. For investors, however, the focus will be on efforts to mitigate risks and maximise returns at their own investee companies rather than other potential asset stranding elsewhere.

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.”

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