The bosses of global energy companies this week urged governments to shift the focus to limiting oil demand to reduce emissions, rather than pressuring producers to curb supply, which they say serves only to increase prices.
Some western governments have announced plans to scale back or halt oil developments and last year, they increased taxes on oil and gas producers after the Ukraine war led to a surge in their profits.
But OPEC ministers and executives from oil companies told a two-day conference in Vienna governments needed to turn their attention from supply to demand.
"We must invest in the energy system of today as unpopular as it sounds... If we don't, we will have a mismatch of supply and demand," BP Chief Executive Bernard Looney said, according to a source present at the conference.
The Organization of the Petroleum Exporting Countries (OPEC) has withheld media access to reporters from Reuters, Bloomberg and the Wall Street Journal to cover the event, which ends on Thursday.
Climate activists and some investors have placed pressure on oil and gas producers to shift their portfolios towards zero-carbon renewable energy to tackle global warming.
But record profits from oil and gas last year and relatively low returns from renewable energy prompted some investors to demand companies renew their focus on oil and gas to raise profits.
Companies, such as Shell and BP, have slowed plans to reduce fossil fuels output.
In an interview with the BBC published on Thursday, Shell CEO Wael Sawan said cutting oil and gas production would be "dangerous and irresponsible", given the likely impact on prices when inflation is already high.
DEMAND HITS RECORD
Meanwhile, oil demand has reached new peaks of above 102 million barrels per day this year, recovering from a dip during the COVID-19 pandemic. It is expected to rise further, driven by strong demand from Asia and for petrochemical production, oil executives and analysts said.
The burning of fossil fuels accounts for the majority of planet-warming emissions, which scientists say need to be reduced to net zero by 2050 to avoid the most extreme effects of climate change.
The head of Abu Dhabi's national oil company ADNOC, Sultan al Jaber, said the phase down of fossil fuels was inevitable: "But it cannot be irresponsible... It will also depend on strong demand signals."
Abu Dhabi will host U.N. climate talks starting at the end of November.
The oil industry has long said lower investment in oil and gas in the absence of a reduction in oil demand will only lead to higher prices.
"The mistake is to think that if we diminish the investments in the existing system, in oil and gas, then the money will be transferred. No. The reality is if we do it that way, the price will go back up," Patrick Pouyanne, the chief of France's top company TotalEnergies, said.
OPEC ministers and oil companies have said restrictions on access to bank loans for fossil fuel projects have deprived the industry of investments needed to even maintain existing production levels.
Investments in the upstream sector have fallen to about $580 billion this year from a peak of $887 billion in 2014, according to analysts at consultancy Rystad Energy, although they said this week the claims of chronic under-investment were exaggerated.
"It is very important to have the national and international collaboration of governments on subsidies and incentives of all kinds to change consumer habits," said Jean Paul Prates, chief of Brazil's energy giant Petrobras.
"Otherwise we will have the same demand for say plastic that we have now... I believe that a transformation will happen much more on the downstream and demand side rather than upstream," Prates said.
Amin Nasser, CEO of Saudi Aramco, said his company would invest $45-$55 billion this year alone: "It is growing in the years ahead, so this shows our confidence in the future".
(Reuters - Writing by Dmitry Zhdannikov; editing by Barbara Lewis)