Energy Impact Report: Hydrocarbons Edition, Q1 2025

Energy Transition Targets Amid Trade Complexities Transform Oil and Gas Sustainability

This comprehensive analysis examines how hydrocarbon firms are intensifying efforts to curb Scope 3 emissions, which represent approximately 80-90% of total emissions for oil and gas companies. This research reveals a significant divergence in strategic approaches, with BP targeting net-zero greenhouse gas emissions by 2050 and reducing its estimated Scope 3 emissions to 322 MtCO2 in 2024 (an 11% reduction), while ExxonMobil maintains no target for reducing product emissions, arguing that this would increase global emissions. These contrasting strategies reflect differing interpretations of both financial materiality considerations and investor expectations, as well as the impact of materiality dimensions through climate commitments.

The report additionally highlights how recent tariff volatility has disrupted energy transition initiatives for 60% of companies particularly affecting investments in renewable systems and carbon capture technologies.

Call to Action: Oil and gas companies should develop regionally diversified energy portfolios and implement flexible transition strategies that can adapt to trade policy fluctuations ensuring decarbonisation commitments remain viable despite economic uncertainties.

The report highlights substantial progress in carbon capture and storage (CCS) technologies, which have seen increased policy support, streamlined permitting and growing industry interest throughout 2024. Despite this momentum, fewer projects than expected reached final investment decisions due to complex permitting requirements and project-specific risks, as initiatives for capturing, transporting, and storing CO2 often involve different parties throughout the hydrocarbon value chain.

This analysis explores how leading companies are implementing low-carbon shipping fuels, carbon capture technologies and diversification strategies to address ESG concerns while maintaining operational viability. According to the International Energy Agency, approximately 6,000 megatons of CO₂ need to be captured and stored annually by 2050 to meet Paris Agreement goals - representing 16% of current global emissions compared to the mere 25 megatons currently captured in the US and Europe. Companies implementing comprehensive carbon management strategies are demonstrating a greater awareness of the double materiality principles in climate transition planning.

The report examines significant policy developments that are reshaping the industry landscape, including the Oil and Gas Decarbonisation Charter and the evolving CSRD reporting requirements. As these frameworks intensify disclosure expectations around emissions management, low-carbon initiatives and transition planning, companies implementing robust materiality assessment processes are demonstrating enhanced preparedness for this complex regulatory environment.

Looking toward future market dynamics, the report identifies how technological innovations in low-carbon and renewable fuels are transforming industry approaches to sustainability in hard-to-abate sectors. The analysis projects a compound annual growth rate of 18-20% for low-carbon fuels from 2025 to 2050, with carbon pricing and regulatory frameworks promoting the shift towards alternatives that balance environmental objectives with commercial imperatives.