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Balancing Oil and Gas Industry in the Energy Transition Era

Explore the impact of energy transition on oil and gas companies, focusing on ESG criteria, the Paris Agreement goals, OGCI initiative, investor pressure, and the economic growth vs. environmental needs dilemma.

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Balancing Oil and Gas Industry in the Energy Transition Era

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Presentation Transcript

  1. NOIA 2019 Fall MeetingG&G Committee - ESG Panel

  2. Introduction • As fossil fuel producers, oil and gas companies are among the most exposed to the energy transition. • This transition could have a serious impact on long-term average oil prices and refining margins. • The speed of the transition away from carbon-based fuels is uncertain but is beginning to accelerate and will be influenced by external factors such as government environmental policies and regulations on greenhouse gases, plastics, and vehicle electrification.

  3. ESG • Environmental criteria consider how a company performs as a steward of nature. • Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. • Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

  4. Paris Agreement • To limit global temperature increase to "well below" 2.0C (3.6F) above pre-industrial times and "endeavor to limit" the increase to 1.5C • To limit the amount of greenhouse gases emitted by human activity to the same levels that trees, soil and oceans can absorb naturally, beginning at some point between 2050 and 2100 • To review each country's contribution to cutting emissions every five years so they scale up to the challenge • For rich countries to help poorer nations by providing "climate finance" to adapt to climate change and switch to renewable energy.

  5. The Oil and Gas Climate Initiative (OGCI) • The Oil and Gas Climate Initiative (OGCI) is an industry-driven initiative, which will enable the Oil and Gas industry to work collaboratively to address climate concerns. • OGCI has announced investments of one billion dollars over the next decade to accelerate the development of innovative game-changing technologies that have the potential to reduce emissions on significant scale. • The OGCI is comprised of 13 oil and gas companies, representing more than one fifth of the global oil and gas production. 

  6. Investor pressure • Climate change poses a material risk to long-term pension scheme saving. • 58 percent of global hedge fund assets will be tied to ESG criteria in 2020, up from 42 percent last year • "We are seeing a number of large institutional investors putting constraints on where they would invest, which is starting to have an impact on where capital will come from and putting pressure on traditional oil and gas companies to start adapting," says Chris Midgley, head of analytics at information firm S&P Global Platts.

  7. Weighing up economic growth vs needs of the environment • Societal Progress • Population growth • Living conditions • Increased global energy demand • Depletion rates • Carbon emissions • Pressure to reduce emissions • Global warming (1.5C goal) • Lack of reliable alternatives to fossil fuels • Technology breakthroughs

  8. Panel participants Ed Crooks Wood Mackenzie Sarah Courbis Ecology & Environment, Inc Erik Oswald ExxonMobil

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