“Investing in new fossil fuel infrastructure is moral and economic madness,” UN Secretary-General António Guterres said as the Intergovernmental Panel on Climate Change (IPCC) released part of its latest report on Monday. This scientific summary, focused on how the world can cut greenhouse gas emissions, warns of the extraordinary harm to all of humanity caused by fossil fuels and the need for a rapid energy transition away from oil, gas, and coal, calling for meaningful changes over the next three years. “Such investments will soon be stranded assets, a blot on the landscape, and a blight on investment portfolios.”
That same day, oil giant ExxonMobil made an announcement of its own: a $10 billion final investment decision for an oil and gas development project in the South American nation of Guyana that the company said would allow it to add a quarter of a million barrels of oil a day to its production in 2025.
The IPCC’s call to action was urgent.
“We are on a fast track to climate disaster,” Guterres said, reciting a list of consequences that have become all too familiar over the past few years — and warning of worse to come. “Major cities under water. Unprecedented heatwaves. Terrifying storms. Widespread water shortages. The extinction of a million species of plants and animals. This is not fiction or exaggeration. It is what science tells us will result from our current energy policies.”
The IPCC’s report marked the end of an era for fossil fuel producers, some observers said, establishing that, as The Guardian put it, the world has seen “a century of rising emissions [that] must end before 2025 to keep global heating under 1.5C, beyond which severe impacts will increase further, hurting billions of people.”
The disconnect between the two announcements, suggesting two markedly different trajectories for 2025, seems all the more glaring given that ExxonMobil itself has been an active participant in the IPCC “since its inception in 1988,” as the company wrote in a 2021 report. Exxon’s announcement that it plans to continue to pour billions of dollars into nonetheless expanding fossil fuel production — not just in Guyana but around the world — sends a strong message about the direction the company plans to steer, despite the warnings flowing from the IPCC, with consequences for us all.
Since the IPCC’s last report on climate change mitigation in 2014, the world has seen the renewable energy industry surge and some of the fossil fuel industry’s favored concepts, like carbon capture and sequestration, flounder.
Since 2010, wind energy costs have plunged 55 percent — and the costs of solar energy and lithium-ion batteries dropped even further, a stunning 85 percent reduction.
Meanwhile, major carbon capture projects like Southern Company’s $7.5 billion attempt to build a coal-fired plant that could capture its own emissions were abandoned. Other closely watched carbon capture projects like Petra Nova and Boundary Dam have failed to live up to expectations.
As a result of that one-two punch, new fossil fuel projects may find themselves fighting against the tides, facing not just cheaper competition but also the drive to slash demand for their products to combat climate change. “Without carbon capture, coal and gas plants would need to retire about 23 years earlier than expected in order to hold global temperature rise to 1.5 degrees Celsius, and 17 years earlier in the case of the 2 C limit, according to the [IPCC] report,” E&E News explained this week. “To limit warming to 1.5 C, global coal use must drop 95 percent by 2050, the IPCC said. Oil must fall by roughly 60 percent and gas by about 45 percent.”
“It’s now or never, if we want to limit global warming to 1.5°C (2.7°F).” – #IPCC Working Group III Co-Chair Jim Skea on the release of IPCC’s latest #ClimateReport on the mitigation of #climatechange.
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— IPCC (@IPCC_CH) April 4, 2022
Oil markets, of course, remain notoriously bumpy — and amid the upheaval spurred by Russia’s invasion of Ukraine, gasoline prices surged, creating windfalls for unhedged producers. On Monday, the same day as the IPCC report and the $10 billion Guyana investment decision, Exxon separately announced that it expects earnings in the first three months of this year to be the company’s best in seven years. However, Reuters noted, that doesn’t take into account the costs Exxon will incur from pulling out of Russia, which could erase up to $4 billion of the company’s expected earnings of roughly $9.8 billion this quarter.
Of course, oil and gas drilling can be a gamble for plenty of other reasons. Last week, Exxon reported failing to strike oil in its first well in a highly anticipated project near the coast of Brazil, another attempt to expand its South American oil production. A week earlier, Murphy Oil, one of Exxon’s partners in the project, had told investors that the oilfield could hold up to a billion barrels of oil (about a tenth of the amount believed to be in the oilfield in Guyana’s waters). An Exxon spokesperson told Bloomberg the company will “continue to integrate the data” from that dry hole “in order to better understand the exploration potential” in Brazil.
Meanwhile, company executives sought to frame Exxon’s $10 billion investment in the Yellowtail offshore drilling project in Guyanese waters as part of the “energy transition,” a phrase that’s commonly used to refer to the shift away from fossil fuels to renewables.
“Yellowtail’s development further demonstrates the successful partnership between ExxonMobil and Guyana, and helps provide the world with another reliable source of energy to meet future demand and ensure a secure energy transition,” Liam Mallon, president of ExxonMobil Upstream Company, said in a statement. “We are working to maximize benefits for the people of Guyana and increase global supplies through safe and responsible development on an accelerated schedule.”
But such statements are coming under increased scrutiny on the global stage. In his speech reacting to the IPCC report, the UN’s Guterres faulted politicians and business management alike for their roles in continuing to promote fossil fuels while paying lip service to energy transitions.
“Some government and business leaders are saying one thing – but doing another,” he said. “Simply put, they are lying. And the results will be catastrophic.”