High-cost producers may lose 50%-70% of revenue including 6 African countries; but low-cost producers are not safe 

LONDON/NEW YORK, 1 December — The United Arab Emirates, host of COP28, is one of 28 petrostates that risk losing more than half their expected income from fossil fuels by 2040 as the energy transition accelerates, technologies advance and climate policy tightens, finds a report released today by think tank Carbon Tracker.

Demand for oil and gas is increasingly expected to be in decline by the end of the decade, with falling prices likely exacerbated by oversupply. The report warns that in many producing countries this will leave a significant hole in government finances, limiting their ability to provide public services and threatening stability. Even countries with lower-cost oil and gas project options are not cushioned and face a future of declining revenues.

The London-based financial think tank finds that governments and companies may be planning for a slow transition and planning on business-as-usual investment, but even a moderately paced energy transition could have a dramatic impact on their finances. Up to 2040, 40 petrostates could see oil and gas revenues fall from an expected $17 trillion to just $9 trillion.

Guy Prince, senior oil & gas analyst and author of the report, said: “Electricity is expanding to become the basis of our entire energy system, driven by falling costs of wind, solar and batteries. This is a profound threat to oil and gas exporting nations, because falling demand for oil and gas is likely to lead to a significant fall in future revenues. Governments should waste no time in reducing their dependence on fossil fuel revenues and take steps to make their economies more resilient and better equipped for a low-carbon future.”

“In many petrostates, a political settlement has become established where citizens expect high public sector salaries and low or zero-income taxes along with a generous welfare state. Restructuring their economies is likely to require parallel political reforms to make lawmakers more accountable and give citizens greater representation.”

Governments worldwide are adopting tougher climate policies in response to unprecedented wildfires, heatwaves, floods and droughts that are already ravaging economies. The remaining Carbon Budget – the amount of CO2 that can be safely emitted to have only a 50% chance of staying within 1.5C warming limit – is rapidly depleting and will be blown by 2030 at the very latest, likely earlier at current rates of emissions.

Ahead of COP28 the European Parliament has backed a Fossil Fuel Non-Proliferation Treaty and called for a global tripling of renewable energy and doubling of energy efficiency by 2030 with a phase out of fossil fuels as soon as possible.[1]

Concern for energy security following Russia’s invasion of Ukraine has also accelerated governments’ moves to reduce their reliance on fossil fuels. Meanwhile, costs of wind, solar and electric vehicles continue to fall, eroding demand for gas and oil.

Global demand for fossil fuels is set to peak before the end of the decade, according to the International Energy Agency (IEA). Demand for oil, which pushed 100 million barrels a day in 2019 is set to fall to 92.5m b/d in 2030 and to 54.8m b/d in 2050 if current government policy pledges are met.[2] However, OPEC forecasts oil demand rising to 116m b/d by 2045.

OPEC+ is already at significant spare capacity, suggesting a weakening market; recent supply restraint from the member states questions the narrative around high demand and plans to increase oil and gas production and exploration. The UAE’s state-owned oil company ADNOC, for example, is the world’s 10th largest producer of oil and gas company and plans to  “hugely” increase production according to media reports. The UN recently warned that fossil fuel producers were planning expansions that would blow the planet’s carbon budget twice over. Experts have called the plans “insane” and said they “throw humanity’s future into question.”

Petrostates of Decline analyses 40 countries with a high economic dependence on oil and gas revenue. It calculates how much their governments rely on revenues and how far these are likely to fall over the period 2023-2040 in a moderately paced transition consistent with limiting global heating to 1.8°C. The report aims to highlight petrostates’ vulnerability to the energy transition rather than predict the future.

It finds that 28 petrostates would lose over half their expected revenue in a moderate transition.

  • The UAE relies on oil and gas for 40% of government income, but production revenue could be 60% lower than expected. Saudi Arabia, the world’s biggest oil exporter, is in a similar situation.
  • Six African states are highly vulnerable with more than 60% of their total budget at risk: Nigeria, home to 215 million people, Angola, Chad, Congo, Equatorial Guinea and Gabon. Oil and gas revenues could be over 70% lower than expected in all but Gabon.
  • Venezuela is one of the countries at greatest risk: government finances are entirely dependent on oil and gas revenues and these could be over 80% below what is expected.

Governments earn revenues through state-owned national oil companies (NOCs) and through taxing oil and gas production. The report warns that when demand declines, much production will no longer be economic and lower prices will bring less revenue from the remaining producing projects.

The highest cost producers face the largest revenue losses. Four NOCs would see 50% or more of new projects that are unneeded under a moderate transition – including Pemex (Mexico), Roseneft (Russia), and Ecopetrol (Colombia).

However, falling prices threaten heavy losses in all petrostates. The Middle East and North Africa regions could collectively see revenues from oil and gas drop 45% in a moderate transition compared with what they may be expecting in a slow transition, while countries in Latin America, the Caribbean and Africa could see greater reductions.

The report notes that national debt is rising in many petrostates. This compounds the issue of falling revenues, by increasing their dependence on oil and gas revenues to service existing debts and reducing their ability to respond to the transition challenge. Among the 33 petrostates for which the IMF has consistent data, average central government debt nearly doubled from 24% of GDP in 2010 to 46% in 2018.

Most petrostates face additional challenges that may threaten their stability as oil revenues fall, including population growth, level of development and political make-up. Africa’s population is expected to double to 2.5 billion by 2050 when it will be home to one in four of the world’s people.

Guy Prince said: “Clearly, such rapidly growing populations in oil and gas revenue dependent states, that are relatively less developed, is a dangerous combination in a future of declining oil and gas demand.”

The report calls on petrostates to: diversify their economies and invest strategically to build up new sectors; broaden their tax base to bring in more income; end subsidies for fossil fuel consumption to reduce pressure on government finances; and invest in sovereign wealth funds while progressively reducing reliance on fossil fuel revenue for current spending.

Dubai is an example of successful diversification. Oil once accounted for over 50% of its GDP, but today it is less than 1% because the country has built a dynamic economy built on import and exports logistics, finance, property and tourism. However, Abu Dhabi, another of the seven emirates that make up the UAE, remains heavily dependent on oil.

The report says many petrostates are likely to need international financial and technical support to make these reforms. “The international community more broadly has a clear stake in supporting petrostates through this process, both for development reasons and to mitigate the very real risk of conflict and instability if these countries are hit hard by the energy transition.”

Just Energy Transition Partnerships have focused on coal phaseout, but they offer a possible model for collaboration with donor/lender countries. Regional cooperation can also play a part, for example petrostates could build shared infrastructure with their neighbours and develop complementary trade strategies.


Carbon Tracker’s analysis and core to its overall thesis assumes that as demand for oil and gas declines, only projects with lower production costs will remain competitive, while high-cost projects risk becoming “stranded assets”. The more the market is oversupplied the further prices are likely to fall. It used the IEA’s Stated Policies Scenario (STEPS), consistent with a 2.4°C pathway, to model industry expectations to 2040 with a long-term oil price assumption of $60 a barrel. STEPS models a world where no new government policies are implemented beyond those already in force. However, it projects that demand for coal, oil and gas will all peak before 2030, while OPEC forecasts demand growing over this period.

It used the IEA’s Announced Pledges Scenario (APS), consistent with a 1.8°C pathway, to model a moderate transition with a long-term oil price of $40 a barrel. APS factors in the snowballing economic impacts of renewables alongside a ‘forceful policy response’. Renewables generate half of all electricity by 2030. Oil demand peaks within five years driven by early uptake of EVs.

 Once the embargo lifts the report can be downloaded here: https://carbontracker.org/reports/petrostates-of-decline/

To arrange interviews please contact:

Stefano Ambrogi           sambrogi@carbontracker.org    +44 7557916940

Joel Benjamin               jbenjamin@carbontracker.org   +44 7429637423

Dan Cronin                   dcronin@carbontracker.org      +1-617-678-5263

About Carbon Tracker

The Carbon Tracker Initiative is a not-for-profit financial think tank that seeks to promote a climate-secure global energy market by aligning capital markets with climate reality. Our research to date on the carbon bubble, unburnable carbon and stranded assets has begun a new debate on how to align the financial system with the energy transition to a low carbon future. www.carbontracker.org

[1] EU Parliament calls for negotiation of a Fossil Fuel Treaty in formal COP28 position, 21-11-23
[2] IEA’s World Energy Outlook 2023, Announced Pledges Scenario. Oil demand figures exclude biofuels demand.