Eagle Ford drilling rigClimate-related risks have the potential to impact our business in several ways. Our SD risk management processes identify those risks and assess the potential size, scope and prioritization of each. We have aligned a description of these impacts with the recommendations of the TCFD.

Products and Services

Compliance with policy changes that create a GHG tax, fee, emissions trading scheme or GHG reductions could significantly increase product costs for consumers and reduce demand for natural gas- and oil-derived products. Demand could also be eroded by conservation plans and efforts undertaken in response to global climate-related risk, including plans developed in connection with the Paris Agreement. Many governments also provide, or may in the future provide, tax advantages and other subsidies to support the use and development of alternative energy technologies that could impact demand for our products. However, there are also opportunities associated with increased demand for lower-carbon energy sources such as natural gas to displace coal in power generation and in combination with carbon capture and storage in the production of hydrogen for industrial use.

Our scenario analysis indicates that as the energy sector transitions, it will be important to be competitive on both cost of supply and GHG emission intensity. We have adjusted our portfolio to concentrate on lower-cost production and have divested some of our higher-emissions-intensity natural gas and oil sands fields. We have also set a GHG emissions intensity reduction target for our scope 1 and scope 2 emissions.

Supply Chain and/or Value Chain

We engage with suppliers on the environmental and social aspects of their operations and supply chains through each step of the procurement process, from supplier prequalification through supplier performance evaluation. This includes communicating our expectations and priorities and identifying opportunities for improvement and collaboration related to climate issues, including energy use, GHG management and environmental supply chain risks. We also engage through membership in several trade associations, such as IPIECA, that address climate-related issues through working groups and task forces that include downstream businesses as well as suppliers. We continue to monitor climate-related risks and opportunities related to our supply chain and value chain and believe that maintaining a global network of businesses and suppliers will mitigate physical climate-related risks.

Adaptation and Mitigation Activities

While our business operations are designed and operated to accommodate a range of potential climate conditions, significant changes, such as more-frequent severe weather in the markets we serve or the areas where our assets are located, could cause increased expenses and impact to our operations. The costs associated with interrupted operations will depend on the duration and severity of any physical event and the damage and remedial work to be carried out. Financial implications could include business interruption, damage or loss of production uptime and delayed access to resources and markets. For example, a three-day shutdown of all U.S. Gulf Coast production would cause $35 million in lost revenue, based on the 2019 average production and our average worldwide realized price of $48.78 per barrel of oil equivalent (BOE). It is likely that not all our Gulf Coast area production would be affected, as assets further inland are less susceptible to hurricanes than offshore assets in the Gulf of Mexico.

Business-resiliency planning is a process that helps us prepare to mitigate potential physical risks of a changing climate in a cost-effective manner. During Hurricane Harvey in 2017, we put our hurricane and crisis response training and business continuity plans into action in the United States. Prior to Harvey’s landfall, Lower 48 employees safely shut down and secured Eagle Ford production and associated facilities. Personnel were evacuated from our Magnolia platform in the Gulf of Mexico, though production remained online. Once the storm passed, production in the Eagle Ford resumed within several days, despite unprecedented conditions and infrastructure constraints in the area.

We continue to conduct workshops on resiliency risks in key business units to establish future mitigations for potential physical changes to the operating environment. Business units in Texas, Alaska, Canada and Australia have participated in this process and integrated the results into their goals. In 2019 we facilitated a workshop in Canada and produced a report on the resiliency risks around our new Montney development.

Research and Development

Technology will play a major role in addressing GHG emissions, whether through reducing fugitive emissions or lowering the energy intensity of our operations or value chain. In Canada we are sponsoring the NRG COSIA Carbon XPRIZE to incentivize and accelerate development of technologies that convert carbon dioxide into valuable products.

Our annual MACC process identifies and prioritizes our emissions-reduction opportunities from operations based on the cost per tonne of carbon dioxide equivalent abated. This data helps identify projects that might become viable in the future through further research, development and deployment. As a result of this work, we have focused our near-term technology investments on reducing both costs and emissions where feasible, such as improving the steam-to-oil ratio in the oil sands. Part of a new research and development effort is a multilateral well technology pilot, which enables the drilling of multiple lateral sections without the need for additional above ground capital or additional steam injection, thereby reducing emissions intensity and operating costs.

Over the past three years we have spent more than $400 million on research and development, equipment, products and services which have reduced our GHG emissions. Large scale commercial deployment projects include: 

  • Eliminating the majority of methane emissions by using air, rather than natural gas, to drive equipment at our Montney development in Canada.
  • Reducing emissions by electrifying plant and pad equipment in Alaska.
  • Installing vapor recovery systems to capture methane emissions in Lower 48. 

Investments Which Reduced GHG Emissions

Technology Area Stage of Development 2017, 2018, 2019 Investments
Energy Efficiency Applied research and development $2 million
Pilot demonstration $40 million
Small-scale commercial deployment $26 million
Large-scale commercial deployment $206 million
Methane Detection and Reduction Applied research and development $2 million
Large-scale commercial deployment $5 million
Other Emission Reductions Small-scale commercial deployment $3 million
Large-scale commercial deployment $142 million

Operations

We have acted to mitigate our GHG emissions for many years. Our first Climate Change Action Plan was introduced in 2008, and since then we have voluntarily reduced our annual global GHG emissions compared to business as usual. In 2017, we introduced a long-term GHG emissions intensity target to incentivize reductions in our production operations as well as project design, exploration and portfolio decisions. To date, this has resulted in a reduction of both our emissions intensity and our absolute emissions. Most of the reduction projects carried out since 2008 have paid for themselves through increased sales of natural gas. Around two-thirds of the projects carried out relate to the reduced emissions of methane from reduced venting, updated plunger lifts or replacing pneumatic controllers.

To continue those reductions, we have set up regional teams in North America, Australia, Southeast Asia and Europe to use the MACC process to identify energy efficiency projects for consideration in the Long-Range Plan. By evaluating our day-to-day decisions regarding flaring, drilling, completions and equipment use we have gained a sharper focus on energy consumption, along with increased revenue, reduced energy costs, reduced emissions and an improved overall cost of supply.                                        

We are one of more than 80 companies participating in The Environmental Partnership, a coalition of natural gas and oil companies focused on accelerating environmental performance improvements from operations across the United States. The partnership prioritizes managing methane emissions and aligns with our focus on emissions reductions and high environmental standards.