COP28: OPEC urges members to reject fossil fuel phaseout

OPEC has warned its member countries that a phaseout of fossil fuels being negotiated at the COP28 UN climate change summit would jeopardize their economies, and that any agreement should focus on emissions rather than targeting energy sources.

In a letter to its 13 members and several allies seen by S&P Global Commodity Insights and confirmed by three officials, OPEC Secretary General Haitham al-Ghais urged the rejection of any language in any COP28 agreement that singles out fossil fuels, as the talks intensify.

"It would be unacceptable that politically motivated campaigns put our people's prosperity and future at risk," Ghais wrote. "I avail of this opportunity to respectfully urge all esteemed OPEC member countries and non-OPEC countries ... to proactivity reject any text or formula that targets energy, i.e. fossil fuels, rather than emissions."

Oil, gas and coal producers have been haggling with environmentalists at COP28 over how to regulate future energy consumption, with the so-called "global stocktake" communique from the summit still being drafted. At the core of the issue is whether language including a phaseout of fossil fuels should be included in the stocktake.

The UN Framework Convention on Climate Change (UNFCCC) has repeatedly said phasing out of fossil fuels is urgently needed for the world to meet its Paris Agreement commitments to limit warming to 1.5 degrees Celsius above pre-industrial levels.

But COP28 is being hosted by the UAE, a core OPEC member and its fourth largest crude producer. The country's Abu Dhabi National Oil Co. has outlined plans to boost its crude production capacity from 4.65 million b/d to 5 million b/d by 2027.

COP28 President Sultan al-Jaber, who is also the chief executive of ADNOC, has said the summit will be "inclusive" and involve the fossil fuel industry, insisting that oil, gas and coal will remain a significant part of the energy mix for decades to come, in the face of criticism from environmental advocates.

Investment worries

Ghais told S&P Global Commodity Insights that the letter was sent to advise OPEC members, all of whom depend on oil revenues for the overwhelming majority of their budgets.

"What we will continue to advocate for is reducing emissions, not choosing energy sources," he said in a statement. "The world requires major investments in all energies, including hydrocarbons, all technologies, and an understanding of the energy needs of all peoples. Energy transitions must be just, fair and inclusive."

The letter was sent Dec. 6, two officials said.

OPEC has aligned with Russia and nine other key oil producers since 2017 to manage the crude market through series of production cuts aimed at bolstering prices. Together, the OPEC+ coalition controls some 50% of global oil supply, and Russian President Vladimir Putin on Dec. 6 visited the UAE and neighboring Saudi Arabia, with whom Moscow co-chairs the producer alliance, to affirm their cooperation on several economic and geopolitical fronts, including oil.

At previous COP summits, OPEC and its members have railed against efforts to block oil development, saying a too aggressive energy transition strategy that discourages hydrocarbon investment would lead to supply shocks and exacerbate energy poverty in the global south.

OPEC's most recent long-term energy forecast, issued Oct. 9, estimated that global oil demand will expand about 3 million b/d of oil equivalent annually to hit 116 million b/d by 2045, driven by population growth, particularly in the Middle East, Africa and Asia.

The COP28 talks are scheduled to conclude Dec. 12.