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The author is the former CEO of Petrobras, a former Brazilian senator, and the current chair of Cerne, a Brazilian think-tank focused on energy, natural resources and the energy transition
The Iran conflict has handed national oil companies (NOCs) a substantial windfall. Governments are booking revenues they have not seen in years. But recent events are no case for doubling down on oil. In fact they are the strongest warning yet that dependence leaves countries exposed to shocks they do not control.
NOCs have long been the elephant in the room in the global energy debate, subject to far less scrutiny than their privately owned peers. As the former CEO of one, this has always struck me as perverse.
These companies account for roughly half of global oil and gas production, around 40 per cent of sector investment, and about two-thirds of known hydrocarbon reserves. Entire economies and workforces depend on them. Yet very few have transition strategies that seriously confront the risk of declining demand, the need to reduce their dependence on oil revenues, and industrial renewal. Analysis suggests NOCs are putting roughly $425bn into projects that are unlikely to be profitable under lower demand scenarios. Meanwhile, producer states could lose trillions in expected revenues by 2040 under a moderately paced transition. It is bad business planning.
Current events are making the economic risks clear in a way that years of climate diplomacy often could not. Oil production does not insulate a country from instability; it amplifies exposure to price swings, supply disruptions and inflation. The governments most at risk are often those with the least capacity to absorb the shock — with budgets heavily tied to hydrocarbon revenues and weak or incomplete diversification strategies.
Today’s windfall is not a vindication of the old model; it is perhaps the last opportunity to reduce dependence on it.
I say this as someone who has spent his career in the industry. The long-term health of companies like Petrobras is inseparable from the prosperity of the countries that own them. I have told them directly that they will not exist in 40 years if they continue on the same path.
The transition away from fossil fuels will not be instant or linear. Oil and gas will remain part of the global energy mix for years. But the direction is clear: renewables keep gaining share, electrification is accelerating, and even the IEA’s Stated Policies Scenario sees oil demand flattening by the end of this decade. The question is whether NOCs use this window to capture the industrial, employment and fiscal gains that adaptation promises, or continue to invest as if yesterday’s assumptions will govern tomorrow’s world.
Governments that depend on oil revenues are now trying to shield households and industry from the very prices their public finances rely on. In Brazil, the government has announced measures to cushion the impact of higher international oil prices — understandable in the short run, but a clear illustration of the dissonant thinking, and a long-term trap.
Domestic renewable energy does not eliminate every source of risk. But it does reduce exposure to distant conflicts, external price spikes and shipping chokepoints. It gives countries more control over the cost base of their own development.
We now have a more practical framework for how transition can work — and it is not a call for immediate shutdowns. It is a call for differentiated strategy.
Some companies, including Petrobras and Colombia’s Ecopetrol, have the engineering capacity, market position and policy environment to move faster in low-carbon fuels, electricity, industrial decarbonisation and related infrastructure. Others, especially in fragile states where public finances remain overwhelmingly dependent on oil, will need more international support than they currently receive.
As the architect of the global Roadmap for Transitioning Away from Fossil Fuels, to be delivered at COP31 later this year, my country leads the most important fiscal and industrial planning exercise of this decade. NOCs and their host governments would do well to engage while they still have the chance.
The countries that define the next era of prosperity will not be those that extracted the most oil and gas. They will be those that used today’s revenues to build something more resilient, more competitive and more durable than fossil dependence.
They say you should fix the roof while the sun is shining. It is an apt metaphor for NOCs. This could be the last time producers enjoy both the cash flow and the political space to prepare seriously for what comes next.
