How petro-nations are approaching the shift to net zero and the future of oil

As the world moves toward reducing greenhouse gas emissions and embracing low-carbon sources of energy, many oil-producing nations like Canada are grappling with the same balancing act. On one hand, they are striving to reach climate goals, while also weighing financial, economicand political considerations.

Considering the extraordinary wildfire season in Canada, coupled with record heat waves and record temperatures around the globe, there is motivation for some countries to move fasterto reduce emissions.

However, others are hesitant, as the Russian invasion of Ukraine has caused turmoil for energy systems around the world and put more emphasis on the need for energy security, while keeping utility prices in check.

Around the world, oil-producing countries are taking different approaches to the problem, which highlights how the energy transition will happen at a different speed and scale from one nation to another as they each face contrasting financial challenges and viewpoints about the future.

"Countries have varying starting points and levels of responsibility and capabilities. Consequently, they have adopted various time frames for their net zero emissions pledges," the International Energy Agency (IEA) saidin a new report released Tuesday.

Finland wants to reach net zero by 2035, while China and Saudi Arabia have a target of 2050. Other countries,like Kuwait and Qatar, don't have a target at all.

All of these competing priorities of oil-producing countries were on display in Calgary last week at the World Petroleum Congress, an oil and gas conference where many industry and government leaders shared their vision for the energy transition.

Policies and giant subsidies

In Canada, the federal government has climate goals in place and has several initiatives aimed at curbing emissions from heating and cooling buildings and the transportation sector, among many others.

Ottawa plans to unveil an emissions cap on the oilpatch later this year, while also funding clean technologies in the industry and subsidizing the development of carbon capture and storage facilities.

Stateside, oil production is on the rise, but a clean energy renaissance could be on the horizon after the passing of the Inflation Reduction Act (IRA), a massive spending bill aimed at cutting emissions and promoting low-carbon sources of energy.

"We're at a critical point in the energy transition,"said Caroline Narich, a U.S.-based managing director focused on the energy transition with Accenture, a technology and consulting firm.

"In some places we are seeing unprecedented action being taken, with a slew of commitments and phenomenal levels of policy and funding support being made available for the first time."

While on stage at the World Petroleum Congress, Narichpointed to the IRA and other government programs providing "more than $450 billion available in loans, grantsand tax credits to support decarbonization efforts."

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Keith Hirsche is a former oil and gas worker who worked in Alberta and Europe. He now lives in Duncan and runs a company in Alberta called RenuWell Energy Solutions, which converts abandoned oil wells into solar farms. He spoke with Jason D'Souza about the 24th World Petroleum Congress taking place in Calgary this week.

Cash considerations

The size of the IRA is larger than the total economy of some countries around the world, including Ghana, which has a history of financial struggles even after becoming an oil-producing nation in 2010.

The West African country has just signed a new bailout programwith the International Monetary Fund worth $3 billion US that's aimed athelping ease the country's severe financial woes.

The country has a target to reduce national emissions by 2030, as well as signing both the Paris Agreement and the Glasgow Climate Pact.

At the same time, it's looking to ramp up oil production and that's why some of its officials were in Calgary trying to drum up investment.

Some of its environmental priorities include a zero-flaring policy for the oilpatch and using renewable energy on offshore platforms instead of natural gas for electricity in the future.

"Ghana sees a clear signpost of what we need to do to join the rest of the world in this energy transition scenario that we find ourselves in," said Egbert Faibille, chief executive of Ghana's Petroleum Commission, in an interview.

"I will say to investors that want to look to Ghana, if there is any West African country that is ready-prepared to deal with this energy transition issue, it is Ghana."

Earlier this month, the IEAmade headlines around the globe by suggesting peak demand for fossil fuels will happen within this decade and that, while timelines vary, oil, gas and coal are all on their way out.

The leaders of Saudi Arabia and some other nations have rejected the projection, pointing to how the world's thirst for oil keeps increasing year after year.

While forecasts may vary, the notion of peak oil demand and the concerns about climate change have some oil-producing countries seeking to cash in before sector fortunes begin to fade.

Guyana has one of the fastest growing economies in the world as its oilpatch has flourished with extraordinary levels of foreign investment and several new discoveries of oil reserves.

The small South American country, which borders Venezuela, is ramping up oil production as the world begins shifting to cleaner forms of energy, leaving President Irfaan Ali to remark in the past how "time is not on our side,"in terms of making the most out of Guyana's newfound oil wealth.

Climate action

There is no specific roadmap for how oil companies and oil-producing countries should reduce emissions, although environmental advocates often focus on a necessary level of speed and scale to reduce the impacts of climate change.

In its latest research, the IEAshows a decrease in global emissions in the years to come, but warns that it'snowhere near steep enough to put the world on a path to limiting temperature rises to 1.5 C above pre-industrialized levels, which is considered important to avoiding a climate catastrophe.

"Considerable progress has been made in deploying clean energy technologies and lowering their cost, which is altering the emissions outlook for the energy sector," the IEA statedin its most recentreport. "Although it still falls far short of what is needed to meet the temperature goals of the Paris Agreement."

The energy transition has to also be sustainable, so companies and governments don't give up when the going gets tough, said Jon Elkind, a scholar at Columbia University's Center on Global Energy Policy.

"Durability means the ability of society to sustain its focus on decarbonization progressively over time through economic cycles, through wars, such as we've seen with the Russian invasion of Ukraine [and] through pandemics." he said, on stage in Calgary last week.

"We need that durability," Elkind said.

Preparing for life withoutoil

While some countries are beingaggressive in pumping out more oil, others are contemplating life without it.

Bahrain, an island in the Middle East, has produced oil and natural gas for almost a century and isone of the most emissions-intensive countries in the world.

The country is about the geographical size of Calgary, but is home to several large industrial facilitiesincluding a massive refinery, a natural gas power plant, an aluminum smelter and an iron production plant all in a relatively small geographical footprint.Bahrainonly hopes to reach net-zero emissions by 2060.

"Bahrain today faces unique challenges requiring a transformative leap. Our domestic natural resources are depleting, exasperated by rising extraction costs," said Mark Thomas, a Canadian, who oversees Bapco Energies, Bahrain's national oil company.

"The economic return [of oil and gas] has been fabulous, but it has come at a cost from a carbon standpoint," he told a crowd at the World Petroleum Congress.

There isn't much spare land in Bahrain for large-scale renewable energy projects, said Thomas, so it's trying to reduce emissions by pushing energy efficiency policies, among other measures, including trying to re-think its overall economy.

"The future of Bahrain is not a high energy intensity country. It will migrate into other investments in lower carbon intensity," he said, pointing to the technology sectoras an example.

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Oil production around the southwest Manitoba community of Virden remains steady, and while diversifying the economy away from fossil fuels will be key for the region in the future, it's not an immediate concern for some local leaders.

Achieving secure, clean and affordable energy across all sectors within the next decade will be a challengefor the country, he said.

Considering Bahrain's relatively small size, its total emissions won't make much of a difference to climate change around the world, Thomas said, however the country made a climate commitment, so it wants to achieve that target, regardless of its size.