Alannah Nathan
Climate & Energy
Fall 2022

Is the oil and gas industry ready for the energy transition? 

By Alannah Nathan (SFS ‘24) and Common Home Editor

Photo by Patrick Hendry.

Alannah Nathan, a rising Junior in Georgetown’s School of Foreign Service and Common Home editor, shares insights from her recent research through The Laidlaw Foundation’s Undergraduate Research and Leadership Program on the role of oil and gas companies in the global energy transition from non-renewable to renewable sources of energy.

Just twenty fossil fuel companies are responsible for 35% of all energy-related carbon dioxide and methane emissions since 1965. Given their outsized impact on climate change, oil and gas companies now face immense pressure from key stakeholders including investors, governments, and the public to define their role in the current green energy transition – the shift in the primary energy supply from non-renewable to renewables sources of energy – and achieve net-zero emissions by 2050. 

A recent Atlantic Council report highlights the two choices oil and gas companies face in how to respond to the growing calls for decarbonization. In areas where energy demand is rapidly growing (such as China, Africa, and India), oil and gas companies might support coal-to-gas switching and invest in electrification infrastructure. Natural gas, though still a greenhouse gas, emits between 50 and 60 percent less carbon dioxide when combusted than coal. 

Just twenty fossil fuel companies are responsible for 35% of all energy-related carbon dioxide and methane emissions since 1965.

Alternatively, in regions where energy demand is already high, oil and gas companies can choose to deploy renewables and new technologies. In such cases, new deployments would serve not merely as a hedge against demand risk— or a means to decarbonize their own production (the production and extraction process of oil and gas itself is a highly carbon intensive process, accounting for roughly 20% of oil and gas companies’ emissions)— but to support the low carbon energy transition as a whole. 

The oil and gas sectors hold a competitive advantage over emerging energy companies  in certain key areas. Unlike young companies (a new solar company, for instance) , veteran oil and gas companies have historically strong balance sheets, supply chain infrastructure expertise, and complex project management skills. If leveraged properly, the oil and gas industry has the unique skillset to aid the hydrogen economy, develop offshore wind infrastructure, support electrification (including EV charging stations), and build out carbon capture and storage (CCS). 

Danish multinational Ørsted A/S, suggests that such a shift in business models is indeed possible (and potentially highly profitable). 

In 1991, Ørsted (then named DONG) developed the world’s first offshore wind farm in the Baltic Sea. At the time, the wind farm of eleven turbines supplied a mere 1% of Denmark’s electricity. In 2012, DONG faced financial disaster, a result of the fracking boom in the U.S. which sent gas prices to the floor. 

Then, newly appointed CEO Henrik Poulsen developed a strategy to transform DONG into a major offshore wind developer. The company set an installation cost target of approximately USD 100 per Mwh by 2020. By 2016, they had already brought the cost down to USD 60. Danish government policy, technological innovation, and supply chain expertise helped drive down costs.  As a first mover in offshore wind, Ørsted held and still holds a significant advantage.

In 2016, the company went public with a value of USD 15 billion. In 2021, Ørsted’s market capitalization reached as high as USD 93 billion. Ørsted has since acquired wind farms across the globe, including the Block Island Wind Farm off the coast of Rhode Island. By 2020, Ørsted generated 90% renewable energy. It is now the largest offshore wind developer, supplying power for more than 15 million people. Ørsted is on track to be carbon neutral across its operations and energy production (scope 1 and scope 2)1 by 2025. Additionally, by 2040, Ørsted has set a target to reach net zero ambitions across the entire value chain, including scope 3.2

Ørsted proves that the transition to renewables can be profitable for traditional oil and gas companies when done right. Unfortunately, few other oil and gas companies are on par with Ørsted’s transition. 

Even as discourse and marketing on the energy transition, climate, emissions, and renewables significantly increases among major oil and gas companies, the transition stagnates. TotalEnergies, for instance, used “climate” 6 times in their 2009 annual report, compared to 426 times in their 2021 report. 

In addition, many companies have also announced net-zero targets by 2050 for at least scope 1 and scope 2 emissions. However, no major companies3 have identified a clear and strategic plan to transition to net-zero emissions in line with the Paris Agreement. 

Each of the seven majors has acknowledged the science of climate change and pledged to reduce methane emissions and achieve at least net-zero Scope 1 and Scope 2 emissions by 2050, but their continued commitment to fossil fuel extraction and production raises doubts of their claim’s sincerity. To date, clean energy investment accounts for only 5% of total oil and gas company capital expenditures globally (an increase from 1% in 2019).

No major companies have identified a clear and strategic plan to transition to net-zero emissions in line with the Paris Agreement.

Moreover, if oil and gas majors’ continue to extract resources and produce oil and gas at their historic rate, existing infrastructure alone will emit roughly 658 GGt of CO2, overshooting the carbon budget allowed to reach the Paris Agreement (400 GGt of CO2) by about 258 GGt of CO2. Furthermore, if built, proposed power plants (planned, permitted, or under construction) are expected to emit an extra 188 gigatonnes CO2. Taken together, the 846 gigatonnes CO2 from predicted emissions from existing and proposed energy infrastructure shoot past the entire carbon budget to limit warming to 1.5℃ . 

Evidence indicates that investors, policymakers, and the public should be cautious of the oil and gas industry’s green claims. To achieve the Paris Agreement, the oil and gas sectors’ climate engagement thus far signals the vital importance of policy in holding the industry accountable. 


Scope 1 emissions are greenhouse gas (GHG) emissions from sources in direct control or ownership of an organization (e.g emissions from methane leaks, gas flaring, or oil company vehicles). Scope 2 emissions are indirect GHG emissions and beyond direct control of an organization (e.g. emissions from the generation of electricity or heat that an oil company buys from utilities). 

2 Scope 3 emissions are indirect GHG emissions from assets not owned or controlled by an organization (e.g. emissions from products sold).

3 The seven oil and gas majors listed on the American and European stock exchange are Shell, BP, ExxonMobil, Chevron, TotalEnergies, Eni, and ConocoPhillips.

energy transition