COP31: National Oil Companies Must Lead Global Shift Away from Fossil Fuels, Says NRGI Expert
ANTALYA, Türkiye, November 14 (IPS) - The shift away from fossil fuels is made more difficult by the powerful, often overlooked role of national oil companies. These companies are deeply embedded in their countries’ economies and political systems.
During the COP31 climate summit in Antalya, Inter Press Service (IPS) spoke exclusively with Amir Shafaie, Legal and Economic Program Director at the Natural Resource Governance Institute (NRGI), about the role of state-owned oil companies in the energy transition, the financial risks of continued fossil fuel investments and the policies governments need to adopt to meet global climate goals.
Shafaie said national oil companies produced 54 percent of the world’s oil and half of its gas in 2025. Their share of global production could rise to around 62 percent by 2050 if current trends continue.
Excerpts from the interview:
IPS: National oil companies account for nearly half of global fossil fuel production. How significant is their role in the global transition away from fossil fuels, and why have they received less attention in climate negotiations?
Shafaie: National oil companies are even more significant than the question suggests. In 2025 they produced 54% of the world’s oil and half its gas, and their share is projected to reach around 62% by 2050. Last year (2025) NOC capital expenditure was around US$240 billion — more than three times what the oil majors spent. So, the pace of the transition away from fossil fuels will be significantly shaped by these state-owned companies.
NOCs are also politically sensitive. They often have a massive role in the national political economy and significant influence over government: they fund national budgets and public services and are often bound up with national identity.
Given their importance, it’s time to stop treating them as a footnote in transition conversations.
They deserve to be a headline.
IPS: What specific steps should national oil companies take to align their business strategies with the global goal of limiting temperature rise to 1.5°C?
Shafaie: There is no single model — NOCs differ widely in mandate and capability — but every NOC needs a deliberate strategy of transformation to navigate the energy transition, and government owners of NOCs need to ensure that is the case.
As a first step, NOCs must stop treating business as usual as a neutral option and start to seriously assess the risks – and opportunities – presented by the global energy transition. Every NOC should test its planned investments against various demand scenarios, including those in which countries meet their climate pledges and oil and gas demand falls — and publish the results. Many projects that NOCs view positively today may not pay back. In 2023, NRGI analysis found that NOCs plan about US$1.8 trillion of upstream spending over the 2023-2032 period and that roughly a quarter, about US$425 billion, of that public money would be lost if oil demand falls in line with governments’ climate pledges.
Moreover, in these assessments, NOCs shouldn’t assume a pivot to gas eliminates risk: demand destruction from the recent crisis, with countries switching to renewables that can be cheaper and less geopolitically volatile, works against that; and there is still a lot of gas and LNG coming on to the market in coming years, so projects will need to be competitive.
Governments and NOCs also need a credible plan for the new business areas NOCs pursue, identifying sectors and technologies in which the NOC holds genuine comparative advantages.
Finally, NOCs are not only commercial entities—in many producing regions they are anchor employers and service providers, and their transformation carries real consequences for workers and communities. Governments and NOCs must anticipate the just transition needs of different regions as NOCs transform.”
IPS: How can governments persuade state-owned oil companies to reduce fossil fuel production while balancing energy security, economic growth and employment concerns?
Shafaie: Balancing these various concerns is not easy, but governments need to weigh all the factors (energy security, economic growth, employment concerns and production plans), not focus on just one or some of them. Governments are also well placed to do this with NOCS.
They own these companies or hold large stakes in them, so this is less about persuading NOCs than about setting a clear policy, including around how much revenue can go back into new oil and gas and requiring investments to be tested against different demand scenarios.
And there is room to balance these factors. The recent energy crisis shows that energy security and energy transition are not opposites: oil dependence is itself a security and cost-of-living risk, and NOCs often end up absorbing the cost, as Pertamina has with subsidised fuel prices.
The challenge also looks different for NOCs in net-importing and net-exporting countries. In net importers such as Thailand, producing more at home offers little protection from world prices, so the energy security gains come from cutting demand and diversifying supply. In large net exporters such as the UAE or Norway, the main risk is volatile revenues, and today’s windfalls are an opportunity to diversify their economies. Many NOCs, including Pemex, Pertamina, NNPC and increasingly Ecopetrol in the case of gas, sit in between and face both challenges at once, so governments need mandates that address both.”
IPS: What risks do continued investments in new oil and gas fields pose to developing countries, particularly in terms of stranded assets, public finances and long-term energy security?
Shafaie: The risks are significant, and they fall on ordinary people in producing countries. Our 2023 analysis finds that if governments meet their existing climate pledges, around a quarter of NOCs’ planned upstream investments for 2023–2032 may never break even. For some — Uganda’s UNOC and Cameroon’s SNH — the figure exceeds 80%.
When a state company’s assets lose value, the hit lands on public balance sheets, leaving less for health, education and diversification. Current high oil prices can mask these vulnerabilities in the short term, but they don’t remove them. The longer-term dynamics from the energy transition are still there. It is particularly important for NOCs and the government to exercise fiscal discipline in the current context, where market signals may lead them to take greater risks. As UN Secretary General Guterres said at COP31 ‘taxpayers should not underwrite investments that lock in fossil fuel dependence’.
IPS: The COP30 roadmap seeks to accelerate the transition away from fossil fuels. What concrete policy measures, financial incentives and accountability mechanisms are needed to ensure national oil companies become part of this transition rather than obstacles to it?
Shafaie: The Brazil COP roadmap is a significant step forward in taking the “transition away from fossil fuels” from an abstract idea to a basis for national planning. What happens at the national level is what really matters now.
The roadmap rightly asks countries to start now and equitably recognises that what this means in each country will differ, depending on exposure and capacity. The approach looks different in each country and can range from starting the phase-out of licensing and production in rich Global North producers to starting serious transition risk – and opportunity – assessments and associated planning in low- and middle-income producer countries.
The COP30 Presidency Roadmap also rightly recognises the distinctive role of NOCs at the intersection of public revenues, energy security and industrial development. Accordingly, for countries with NOCs, discussions around the NOC’s future should be central from the start if transition plans are to be credible.
International cooperation can also play a vital role in supporting NOC transformations through peer learning around scenario-based planning, disciplined investment decisions, decarbonisation and methane emissions abatement and finance for credible diversification into renewable energy and other business areas.
IPS UN Bureau Report
© Inter Press Service (20261114135222) — All Rights Reserved. Original source: Inter Press Service