The International Energy Agency (IEA) has warned oil and gas companies that failing to adapt to the lower carbon energy agenda could lead to over a trillion dollars worth of assets being abandoned by 2050.

The IEA estimates that a step-change in climate policy away from fossil fuels and towards cleaner sources of energy would leave a total of $1 trillion of oil assets and $300bn in natural gas assets stranded.

The report, undertaken in partnership with the International Renewable Energy Agency, said the move to reduce global greenhouse gases could hold “significant consequences for the energy industry” if companies fail to adapt their portfolios in the wake of the Paris Agreement.

Oil majors including BP and Shell are already adjusting the balance of future investment with a bias towards gas rather oil.

In the past BP’s has focused on oil for 60pc of its portfolio while gas has made by the difference, but last year this ratio flipped in favour of gas. Shell has made moves towards gas production and transport with last year’s £35bn acquisition of BG Group, a leader in producing and shipping cargoes of liquefied natural gas in the global market.

The agency warned that keeping to the Paris deal would require carbon emissions from the energy sector to peak before 2020 and fall by more than 70pc from today’s levels by 2050.

This would require the share of fossil fuels used to create energy to halve between 2014 and 2050 while the share of low-carbon sources - such as renewables, nuclear and carbon capture - would more than triple worldwide to make up 70pc of energy demand in 2050.

David Fuller's view

The IEA makes a good point although I think its estimates are too low.  There is vastly more oil and natural gas around the globe and most of the potential shale sites have yet to be touched.  Additionally, with technological improvements continuing, consider the adage: If you want to produce more oil, just go back to where you found it before because the supply has not been depleted.    

Here is a PDF of Jillian Ambrose’s article.