National oil companies are increasingly emerging as the primary obstacle to the global transition away from fossil fuels, with their influence over state economies and political systems complicating climate goals.
While international negotiations often focus on private oil majors, state-owned entities currently control a majority of global hydrocarbon production.
In 2025, national oil companies (NOCs) were responsible for 54 percent of the world’s oil production and half of its gas, according to data discussed at the COP31 climate summit in Antalya, Türkiye. Projections from the Natural Resource Governance Institute (NRGI) suggest that if current trends persist, the share of global production held by these state-owned firms could climb to 62 percent by 2050.
“National oil companies are even more significant than the question suggests,” said Amir Shafaie, Legal and Economic Program Director at the NRGI, in an exclusive interview with Inter Press Service (IPS). “Last year, 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.”
Financial Risks to Public Balance Sheets
The reliance on these companies for national budget funding and public services creates a complex political dilemma for governments. Shafaie said that because these firms are often intertwined with national identity, they are frequently treated as peripheral to climate discussions rather than central actors.
The economic risks of this dependency are substantial. An NRGI analysis from 2023 indicated that NOCs plan to invest approximately US$1.8 trillion in upstream projects between 2023 and 2032.
Should global oil demand decline in accordance with existing climate pledges, roughly US$425 billion of that public capital faces the risk of becoming stranded assets.
“For some — Uganda’s UNOC and Cameroon’s SNH — the figure exceeds 80 percent,” Shafaie told IPS. “When a state company’s assets lose value, the hit lands on public balance sheets, leaving less for health, education and diversification.”
Governments Must Mandate Stress-Tested Investment Strategies
To mitigate these risks, experts argue that NOCs must move beyond business-as-usual strategies. Shafaie suggests that governments, as the owners or majority stakeholders of these entities, have the authority to set clear mandates that require investments to be stress-tested against various demand scenarios, including those consistent with the 1.5°C temperature goal.
The challenge varies by nation. While net-importing countries like Thailand might prioritize demand reduction and supply diversification to achieve energy security, large exporters such as the UAE and Norway face the volatility of resource-dependent revenues.
Many others, including Pertamina, Pemex, and the NNPC, must manage both the fiscal risks of transition and the industrial necessity of acting as anchor employers for their domestic workforces.
“Governments need to weigh all the factors, not focus on just one or some of them,” Shafaie said. “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.”
The COP30 Presidency Roadmap Drives Actionable National Planning
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