Facing the Future: What National Oil Companies Say About the Energy Transition

• National oil companies (NOCs) should publicly acknowledge the risk of the energy transition, assess this risk, and act by implementing mitigation plans.
• Only 9 out of 21 NOCs analyzed acknowledge the risk of the energy transition, 4 have mentioned the use of transition risk assessments, and 5 have explicitly mentioned strategies to mitigate the risk.
• None of the NOCs have published “just transition plans” detailing how they will help workers and communities.
• NOCs do not plan to decrease investments in risky oil and gas assets. Petrobras (Brazil), Petronas (Malaysia) and Sonangol (Angola) are divesting from less valuable assets, but not necessarily to mitigate transition risk or downsize operations.
• Some NOCs, such as NNPC (Nigeria) and GNPC (Ghana), want to expedite drilling before oil and gas demand falls and acquire assets divested by other companies.
• At least six NOCs intend to increase oil and gas investment to secure energy supplies.
• Most NOCs intend to diversify, especially into gas, oil refineries, petrochemicals and renewable energy. However, it is unclear how much NOCs are spending on diversification or whether these are effective mitigation strategies.
• NOCs can learn from each other. Two NOCs—Ecopetrol (Colombia) and Petrobras—are clear leaders in terms of recognition of energy transition risk. However, NOCs disclosing more transition risk information are not necessarily also those reducing higher-risk investments.

NOCs’ readiness to manage energy transition risk (based on public statements)

National oil companies (NOCs) produce half of the world’s oil, yet only recently have climate organizations considered NOCs a worthwhile area for advocacy.

Unfortunately, understanding of NOCs is limited and often based on generalizations. Although the environmental rationale for NOCs to divest assets linked to fossil fuel extraction is clear, from the economic perspective of NOCs and their governments, complete divestment is not an obvious solution. Divesting allows governments to diversify economies and adapt to climate change, but if oil demand persists, NOCs’ investments could earn their countries significant amounts of money. The concept of “energy transition risk” reflects this challenge. While this term gained prominence in the financial sector, climate organizations have adopted it to advocate for divestment from fossil fuel assets.

This analysis can help NOCs and governments understand what other NOCs are doing, and gain lessons and ideas that can be implemented in their countries. It can also help climate advocates understand NOCs’ attitudes toward energy transition risk, and enable advocates and policymakers to understand how NOCs are managing this risk.