Riskier Bets, Smaller Pockets: How National Oil Companies Are Spending Public Money Amid the Energy Transition
Key messages
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Expecting a slow energy transition away from fossil fuels, national oil companies (NOCs) will likely invest USD 1.8 trillion in upstream oil and gas developments and expansions over the next 10 years.
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But $425 billion—a quarter of the NOCs’ planned investment—will be unprofitable if oil demand falls to 55 million barrels a day, in line with the International Energy Agency’s Announced Pledges Scenario. This is the highest risk portion of the portfolio and has doubled since the Russian invasion of Ukraine.
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NOCs will only profit from around $1.2 trillion of investment (71 percent of the total NOC investment) if humanity fails to contain global temperature rise to below 1.5°C, pushing the world toward climate catastrophe.
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While NOCs are making riskier bets, their debt is rising in some regions. Between 2011 and 2022, the average debt to total asset value of NOCs in sub-Saharan Africa, the Middle East and North Africa, and Latin America rose by a third.
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Governments’ financial pockets are shrinking. Between 2011 and 2021, the average government debt as a proportion of gross domestic product doubled.
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Yet many NOCs have not publicly acknowledged the growing risks of the energy transition. They and their governments must examine how they can generate sufficient revenue and energy for citizens without making even riskier bets with public money.
Value of all NOCs’ aggregate “investment pipelines” measured in 2021 and 2023, by scenarios in which they break even