Scenario analysis

IEA Energy Outlook

We reference energy scenarios from the International Energy Agency (IEA) 2025 World Energy Outlook to inform our view of potential long-term energy demand and transition pathways. The IEA periodically updates its scenarios to reflect evolving policy, market and geopolitical conditions.

The 2025 framework includes three core scenarios:

• Current Policies Scenario (CPS):  Reflects enacted policies only, providing a fact-based reference case grounded in law.

• Stated Policies Scenario (STEPS): Incorporates announced policy intentions and targets, even if not fully implemented.

• Net Zero Emissions by 2050 Scenario (NZE): A normative pathway outlining what would be required to achieve net-zero energy-related CO₂ emissions by 2050.

Under the CPS, total energy demand continues to grow, with oil and natural gas remaining essential through mid-century. Growth reflects population increases, economic expansion and existing policy frameworks, underscoring the need for sustained investment to meet demand and offset natural field decline.

In STEPS, total energy demand growth moderates relative to the CPS. While fossil fuel demand declines from higher levels over time, oil and natural gas continue to play a meaningful role in 2050 alongside increasing deployment of lower-emission technologies.

Scenario planning at ConocoPhillips

Scenarios facilitate understanding a range of risks around energy fundamental drivers and prices. Scenarios, which are hypothetical constructs and are not predictions or forecasts, are useful to discern which factors may drive future developments. We use scenarios in our strategic planning process to:

• Gain a better understanding of external factors that could impact our business to assist in the identification of major risks and opportunities and inform mitigating actions.

• Identify leading indicators and trends.

• Test the resilience of our strategy across different business environments.

• Communicate risks appropriately.

• Inform how we position our business, as technologies and markets evolve, to capitalize on opportunities that meet risk and return criteria.

To assist our capital allocation decisions, we can test our current portfolio of assets and investment opportunities against these future possibilities and identify where strengths and weaknesses may exist.

We use a range of technical and market data and analyses when developing corporate strategy. The energy scenarios provide additional insight that informs strategic decision making and reinforces to stakeholders and shareholders that we are developing resilient strategies that reflect the complex and uncertain range of energy futures.

The current suite of scenarios describe three pathways out of the myriad that are possible, given the uncertainty surrounding the development of future energy markets to 2050. Each scenario models the full energy system including coal, oil, natural gas, solar, wind, geothermal and nuclear, as well as their related GHG emissions and pricing policies. Each of these plausible pathways is designed to stretch our thinking about potential rates of new technology adoption, policy and geopolitical developments, and consumer behavior.

In 2025, we updated the main scenarios in our global energy model to Spark, Globotics, and Regionalism. The three scenarios incorporate a wide range of possible outcomes for energy and carbon emissions. Consistent with our approach to net-zero, we discontinued development of a standalone net-zero scenario, reflecting ongoing uncertainties related to the pace and scale of technology development and the evolution of government policy and support mechanisms.

While these scenarios extend to 2050, well beyond our near-term operational planning period, they give insights on trends that could have an implication for near and medium-term decisions and enable choices on the creation or preservation of future options.

In addition to using the three scenarios to analyze potential outcomes, we regularly monitor key signposts as we work to track the pace and direction of the energy transition and identify potential leading indicators of change in the demand for hydrocarbons. In this way, we aim to establish not just which scenario we are moving toward, but also to identify emerging disruptive scenarios. This analysis is presented to executive management and the board of directors to assist in strategic decision making.  

Scenario descriptions

Scenario	Key assumptions	Energy demand	Oil and gas demand growth 2024-2050
Spark	Non-Organisation for Economic Cooperation and Development (OECD) markets’ economic strength and ready access to oil products and internal combustion vehicles increase oil demand. Transportation electrification slows due to supply chain constraints, limited charging infrastructure, and total ownership costs.	The global oil market grows by 25% over 2024’s 100 MMBOD level, driven by solid economic growth in emerging markets. Natural gas demand steadily increases to meet growing global demand in bulk chemicals, reaching 480 BCFD in 2050, a 20% increase compared to today. Internal combustion engine vehicles account for close to 75% of the global passenger-vehicle fleet in 2050 (down from 95% in 2024).	22%
Globotics	Robotics, communications and artificial intelligence (AI) spur broad electrification across economies. Productivity gains stimulate economies, with technology enabling a higher share of global trade in services relative to manufactured goods. Electrification across all economic sectors lifts gas demand and benefits LNG trade. Technology accelerates transportation electrification at the expense of oil demand.	Global oil demand peaks in the mid-2030s at around 110 MMBOD and then slowly declines to 2010 levels in 2050. By 2050, the global gas market expands by 55% from 2024 levels. The primary driver for natural gas demand growth is power generation, followed by hydrogen production. Global electricity generation more than doubles, reaching 65,000 TWh in 2050, with electricity demand from residential and commercial sectors accounting for more than half the total electricity demand.	16%
Regionalism	National leaders prioritize energy security within regional trading blocs, over economic growth. Non-OECD nations look to China for strategic capital and favorable trade terms. Emerging economies embrace electric vehicles and favor coal, nuclear and renewables for power generation.	The global oil market peaks in size by 2030 and remains near that level until tapering more quickly in the mid-2030s. The global natural gas market declines at an average annual rate of 2% after peaking near 450 BCFD in 2030, as the electricity generation mix shifts toward renewables, nuclear, and coal. Global coal demand continues to grow until the early 2040s, fueled by electrification of emerging economies.	-28%

 

Our scenarios have a wide range of assumptions regarding technological advances, government policies and consumer behaviors, leading to a range of oil and natural gas prices. We take this future price uncertainty into account in our strategy by using a fully burdened cost of supply as our primary criterion for capital allocation. Our cost of supply compares favorably to the expected commodity prices detailed in our own scenarios as well as external scenarios such as the IEA’s Net Zero Emissions scenario.

The scenarios support the assessment of transition risks. A separate scenario process is applied to evaluate physical climate-related risks, using consultant scenarios based on the Intergovernmental Panel on Climate Change (IPCC) modeling. 

Key strategic linkages to our scenario planning

Our corporate strategy reflects several findings from our scenario analysis process. We have acted to:

• Use a fully burdened cost of supply, including cost of carbon aligned with our current probability-weighted energy scenario, as an important metric in our project authorization process. In 2025, we had a resource base of >20 billion barrels of oil equivalent (BOE) with $40 per barrel (or lower) cost of supply. Our strategic objective is to generate competitive returns even in lower price environments, with any oil price above our cost of supply generating an after-tax fully burdened rate of return greater than 10%.

• Prepare for diverse policy and price environments by maintaining a less than $40 per BOE break-even price to generate the cash to fund capital expenditure to maintain production and generate competitive returns to shareholders.

• Maintain diversification in our portfolio to facilitate the balancing of our production and capital expenditures as commodity prices become more volatile.

• Identify and fund economically feasible Scope 1 and Scope 2 emissions reduction projects to reduce the impact of any future regulations, carbon prices or taxes, and to help maintain a low life cycle cost of supply.

• Task each BU with developing potential options to contribute to our Scope 1 and 2 emissions reduction target.

• Introduce a proxy cost of carbon into qualifying project economics to help us be more resilient to climate-related risk in the short to medium term and provide the flexibility to remain resilient in the long term.

• Focus near-term technology investments on reducing both our costs and our emissions where economically feasible.

• Monitor for potential disruptive technologies that might impact the market for natural gas or oil, enabling us to take advantage of our capital flexibility and reduce our exposure to lower commodity prices at an early point in time.

• Evaluate low carbon opportunities as potentially attractive investments in meeting demand for lower carbon energy.

• Monitor global regulatory and legislative developments and engage in development of pragmatic policies aligned with the climate policy principles outlined in our Climate Change Position.