The Major Oil & Gas companies (Exxon, Chevron, BP, Equinor, Total, Shell etc) have adhered to the proposition that gas will be a major component of the (coming sooner or later to a screen near you) Energy Transition. Recognizing that the amount of gas that is flared, ‘vented’ or is ‘fugitive’ represents an Achilles Heel for this story, there has been a great deal of signaling along the lines of ‘trust us, we are dealing with these issues’. However, when you dig into the details, the promises that are being made by some companies do not stand up to scrutiny.
Over the last couple of weeks, the industry has received a couple of significant shocks.
First of all, activist investors have succeeded at the very least in deeply questioning Exxon and Chevron’s respective ‘climate change’ plans.
Secondly, a court in the Hague ruled that Shell’s emission reduction plans were inadequate commenting that its policy was “not concrete, has many caveats and is based on monitoring social development rather than the company’s own responsibility for achieving a CO2 reduction”.
Actually, this is a very good depiction of bland, more of the same, ‘trust us’ plans, all rooted in this blah about ‘being led by societal trends’!
All this has sent a shock wave through not only oil & gas companies but also purchasers of gas. Having discussed this with several industry colleagues, the consequence we believe will be a quest for ‘Responsibly Sourced Gas’, ‘Sustainable Gas’ i.e. gas which is ‘flaring and emissions free’; which will have to be certified as such by accredited professional firms that can verify the amount of emissions and, that if necessary, will stand up in a court of law.
Isn’t it then reasonable to ask what E&Ps that are focused on gas have to say about these issues?
We have accessed the 2020 Reports of 7 of them – Diversified Gas & Oil, Energean, Jadestone Energy, Savannah Energy, SEPLAT Petroleum, Serica Energy and Wentworth Resources - and extracted data to answer 4 questions for each company:
We conclude with a 'traffic light' summary that begins to differentiate these 7 companies, one from another.
In their Annual and/or Sustainability Reports for 2020, these seven – referred to as companies A – G in this summary - have reported on their emissions for the year. It is important to remember that the majority of the reported numbers are not measured but are calculated on the basis of idealised laboratory tests with compressors, turbines, flanges, joints etc.
It was hoped that these companies reported on Scope 1 and 2 total GHG (CO2e) Emissions, CO2 and CH4 Emissions separately, Scope 3 GHG Emissions (from sale of production) and flare volumes. In fact none of them reported on all of these metrics – some only reporting on two of them, and the overall pattern is completely inconsistent. Disappointing!
As a next step, it’s reasonable to ask:
2020 Reporting should yield answers to these questions. However, an honest summary would be that many of these answers are qualitative, short on detail, and deploy ‘trust us’ quite often; some seem simply focused on Business As Usual.
Thus much of what is reported next is a subjective assessment where the following colour code has been used:
These seven companies can, based on this year’s reporting, be differentiated as follows:
This differentiation may offer competitive advantage to one, competitive disadvantage to the others, in the sense that investors can begin to make informed choices, activists can identify plausible targets.
Future Energy Partners is available to support clients on measuring, monitoring, reporting and reducing their flaring and GHG emissions.
