State National Oil Companies will be required to invest about US$400 billion into energy improvement facilities in line with the global transition of fuels.
According to a report by the Natural Resources Governance Institute, this is to combat climate change, an initiative by global leaders to reduce environmental degradation.
State-owned oil companies according to the Natural Resources Governance Institute, produce half of the world’s oil and gas and are responsible for 40 percent of the total capital invested in the industry worldwide.
NRGI report estimates that state oil companies could invest about US$1.9 trillion in the next 10 years but one-fifth which is about US$400 billion would not result in a profit if energy transitions by countries fall in line with the current climate commitments in the Paris agreement.
As a reference, the NRGI cites Nigeria’s National Petroleum Corporation, stating that almost half of the Nigerian upcoming oil projects spends an amount that exceeds the government’s expenditure on education and health care, and may fail to ‘break-even’ if the world makes rapid progress toward climate goals.
The Paris Agreement is a legally binding international treaty on climate change adopted by 196 States in Paris on December 12, 2015 and entered into force in 2016.
The goal of the agreement is to limit global warming to about below 2.0 degrees Celsius, preferably compared to pre-industrial levels.
To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate neutral world by mid-century.
The Paris Agreement is a landmark in the multilateral climate change process because, for the first time, a binding agreement brings all nations into a common cause to undertake ambitious efforts to combat climate change and adapt to its effects.