Ryan Lance on Climate Change
Society faces perhaps the defining challenge of our times as it strives to address climate change while still supplying the energy that drives human and economic progress. These imperatives are reflected in both the Paris Agreement and the United Nations Sustainable Development Goals, which call for action on greenhouse gas emissions, sustainable development and alleviation of poverty.
For ConocoPhillips, meeting this challenge entails ongoing investment in energy development to satisfy world demand, competing financially in a volatile market, and managing climate-related risks and opportunities. We do so by applying well-established governance practices, sound strategy, diligent risk management and responsible performance.
In our strategic planning, we acknowledge the uncertainty inherent to our business. We model a variety of global energy transition scenarios to test the robustness of our portfolio and capital allocation choices. These scenarios also inform us on adapting to evolving technologies and market conditions. As a result, our actions over the last decade and our future plans were designed for resiliency and responsiveness. These same attributes are key to managing climate-related risk and the uncertainties of the energy transition.
We bring other essential strengths to our efforts, among them a geologically and geographically diverse asset portfolio. Its low cost of supply makes future development of our oil and gas resources more likely to remain economically feasible, even in low-demand scenarios aligned with Paris Agreement trajectories. At year-end 2019 our resource base included 15 billion barrels of oil equivalent with an average cost of supply of $30 per barrel. Disclosing our supply curve enables investors to judge our resiliency to lower price or demand scenarios. Adding to this resiliency are a low overall decline rate, and low capital intensity that yields increased free cash flow under reasonable price scenarios.
In support of climate protection, the ConocoPhillips Climate Change Action Plan, which has been in place since 2008, has successfully driven substantial voluntary reductions in greenhouse gas emissions. ConocoPhillips was also the first exploration and production company to set a long-term GHG intensity reduction target. We have advocated for enactment of a U.S. carbon price since 2007 and continue this advocacy through membership in the Climate Leadership Council. We believe a well-designed carbon price would reduce emissions by driving innovation, technology development and efficient end-use of hydrocarbon products.
We recognize that oil and gas industry stakeholders, particularly the financial sector, have rising expectations of our performance on climate protection. To meet these expectations, we are taking numerous actions that include improving our risk-management and governance processes, updating our climate strategy and assessing the physical risks of climate change on specific assets. As a company, we believe we exist for the benefit of all stakeholders and we embrace the opportunity to be an industry leader in delivering on this commitment.
Ryan Lance, Chairman and Chief Executive Officer, July 2020