Russian oil producer Lukoil has warned of impending oil and gas supply shortages due to chronic underinvestment as governments and industries around the globe chase ambitious emissions-reduction targets.

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Fossil fuel companies have scaled back spending amid the transition to greener energy production and low oil prices caused by a slump in global demand amid the coronavirus.

“For... a long time, the oil and gas industry has been experiencing difficulties in attracting investments into greenfield and exploration projects to identify new reserves," Lukoil president Vagit Alekperov said on a conference call on Thursday.

Even in the company’s most optimistic scenario, forecasting that wind and solar will account for 40% of global energy consumption by 2050, the lack of sufficient available capital for existing and new oil and gas projects will see supply struggling to meet demand, he contended.

Alekperov claimed there is a risk of global oil and gas supply shortages in just five years if the current trend of limiting industry investment persists.

This may lead to extreme volatility in energy prices and a slowdown in global economic growth, he added.

“Alternative energy should be affordable and plentiful not only to replace fossil fuels, but also to provide sufficient supply of energy for growing economies,” Alekperov said.

The oil industry should, meanwhile, focus on developing “most [economically] attractive barrels with minimal carbon footprint”, he added.

“Oil will maintain a key role in the global energy balance and as a feedstock for production of consumer goods for many years ahead."

Commitment to reduce carbon footprint

Alekperov said Lukoil is committed to being “a responsible hydrocarbon producer” for decades to come.

“We share ambitions to achieve zero net emissions by 2050," he said, although arguing that the requisite technologies do not exist in sufficient quantity, quality or at low enough cost for the company to do so.

"Technologies to capture, utilise and store CO2 are still in the infancy stage. But we will continue to research this issue,” Alekperov said.

Lukoil started to to reduce its carbon emissions in 2016. By 2019 they had dropped by 2 million tonnes to 48.5 million tonnes, Alekperov said.

The largest drop was in the upstream segment, where carbon dioxide emissions declined by 17% to 21 kilograms per barrel of oil equivalent, Lukoil has said.

By 2030, Lukoil's projected annual CO2 emissions are set to fall by another 10 million tonnes from the 2017 level using “options that [it] can realise under existing legislation and using available technologies”, the company added.

“These are ambitious targets for us but we know today how to achieve them. We will update [emissions] goals as technologies improve and regulation is changed," Alekperov said.