GHG Intensity Target
In 2015, we set a one-year target to decrease greenhouse gas (GHG) emissions by an absolute amount as part of our GHG risk management strategy. Since then, while continuing with our emissions reduction program that has reduced our annual GHG emissions by around 7 million tonnes since 2009, we have been holding internal and external discussions and undertaking analysis to develop a meaningful target and a transparent target-setting process.
There are similarities in the way that we have framed the target to the way the Paris Agreement has been framed. The Paris process uses ‘Nationally Determined Contributions' (NDCs) to set interim performance targets that are reviewed on a five-year basis to move toward achieving the agreement’s objective. We intend to review and adjust our performance target in a similar way.
Just as parties to the Paris Agreement put in place regulations to support their NDCs, we will be reviewing our processes and procedures to ensure that they support our performance target.
We have set a long-term intensity target for three reasons:
- To demonstrate that we are continuing to take greenhouse gas reductions seriously and managing climate-related risks and issues throughout the business.
- To support internal decision-making so that our businesses can build GHG regulatory risk into planning as early as possible in the approval processes.
- To ensure that we have the appropriate risk management discussions regarding climate-related issues as we go through the life cycle of our assets.
We want our stakeholders to know that we are making the right strategic decisions for our business and can report against a performance target. This target is an important step in strengthening our competitive position and consistent with our sustained focus on lower-cost performance.
Definition of GHG emissions intensity? Our performance will be based on gross operated greenhouse gas emissions, stated in carbon dioxide equivalent terms, divided by our gross operated production, stated in barrels of oil equivalent. The target is set in relation to our gross operated emissions as these are the emissions over which we have the most control.
Which greenhouse gases? The target covers all greenhouse gases, but in practice this will apply to carbon dioxide and methane emissions, as it is unlikely that any of our other GHG emissions are material. A single greenhouse gas target allows the company to focus on the greenhouse gas emission reductions that make the most sense, rather than trying to arbitrarily set different targets for different GHGs. We use a Global Warming Potential of 25 to convert methane to carbon dioxide equivalency.
What emissions boundaries? The target applies to both Scope 1 (Process) emissions and Scope 2 (Imported) emissions as these are the emissions that we have the most control over. It is not intended to cover Scope 3 (Consumer) emissions as we have no control in how the raw materials we produce are transformed into other products or consumed. The intensity numbers for our target may differ slightly from the intensity numbers we report in our annual Sustainability Report. This is because the target only includes emissions that are strictly related to production and not emissions from things like our Aviation or Polar Tankers fleets. There may be occasions where we choose to invest in good quality emissions offsets to mitigate our emissions. We will report our performance with and without the impact of these offsets in the interests of transparency.
A range or a single number? Many of the Paris Agreement NDCs have been set as ranges. A range recognizes several uncertainties such as: our changing portfolio; changing commodity pricing; the ability to forecast long-term emissions with precision; technology development; and the speed and scope of GHG regulation implementation.
Intensity target or absolute emissions targets? We are in a dynamic business environment where plans, technology, prices, industry structure and costs all change rapidly. As we learn new information, we often accelerate or defer projects, and we buy, sell, or swap potential oil and gas developments to ensure that our portfolio is competitive. These actions could render an absolute target redundant. An intensity target that allows a company to change its plans without having to reset its target appears to be more durable.
Near-term or long-term? New projects incorporate climate-related risk considerations in their development. Given that it takes several years for projects to be developed, approved, and constructed, it makes business sense to have a target that endures over the lifetime of those activities. Technology also takes time to develop and a longer-term target helps to foster a spirit and culture of innovation.