Near, medium and long-term risks

Drone inspecting operations

As described in the risk management section, we evaluate and track our climate-related risks through our SD Risk Register and Climate Change Action Plan. Those risks broadly fall into the categories of transition risks and physical climate-related impacts, with transition risks further categorized by risk type, including policy, legal, technology, market and reputational risks.

Our planning time horizons are developed according to the time required to realize the majority of the net present value of our projects and the time we expect it will take for the risks to potentially manifest. Our GHG forecasting and financial planning processes are used to determine risks and opportunities that could have a material financial impact for each period.

  • Near-term, one to five years: Complete short-cycle drilling campaigns and small projects. Our near-term climate-related risks are generally government policy-related and managed at the business unit (BU) level through policy advocacy and technology to reduce emissions.
  • Medium-term, six to 10 years: Complete most major projects and revise our portfolio if required. Medium-term risks take longer to impact our business and may include emerging policy that is not yet fully defined. These risks are managed by BU planning but, if significant, may also be managed by corporate strategies and company-wide risk assessments.
  • Long-term, 11 years and beyond: Generally, long-term risks are managed by our scenario analysis and Climate-related Risk Strategy, as they include long-term government policy, technology trends and consumer preferences that affect supply and demand. They may also include risks that align with long-term physical climate scenarios. 
Risk Type Risk Description Potential impact Time Horizon
Physical Risks
Physical Acute and chronic physical climate impacts. May increase costs in design and operations. May disrupt operations and value chain, damage infrastructure, and delay projects. Medium and Long-term
  • Fresh water constraints
  • Wildfire
  • Severe weather — flooding, drought, storms
  • Impacts on permafrost
  • More frequent or more severe weather events over time
  • Rising temperatures
Transition risks
Legal Climate‑related legal actions, including greenwashing and statutory claims.  May result in increased litigation exposure, costs, and reputational harm. Near-term
Policy Current and evolving climate change policy. Near and Medium-term
  • Mandated carbon pricing in various jurisdictions where we operate.
 Carbon pricing and/or regulations may increase compliance costs, affect project economics, and delay development.
  • EU Carbon Border Adjustment Mechanism (CBAM) seeks to put a price on carbon for carbon-intensive traded goods. 
 Oil and gas production is currently outside the scope of CBAM. If oil and gas were included in the future, CBAM could impose additional emissions reporting requirements and compliance costs on oil and gas imports to the EU.
Current and evolving GHG regulations.  
  • Mandated emission monitoring and reporting, such as EPA New Source Performance Standards (NSPS).
 Regulations could result in additional capital expenditures and compliance, operating and maintenance costs.
  • Regulations that challenge or reduce market access.
    • EU Methane Regulation was adopted in 2024 to reduce methane emissions in the energy sector across Europe.
 Potential impacts to price realizations for LNG and crude marketing imports and increased costs associated with reporting burden.
  • Policy volatility and shifting regulatory priorities.
 Potential to create investment uncertainty and increase compliance cost variability, while raising the risk that future policy tightening could result in accelerated cost or higher cost mitigation.
Reputation Reduced access to investment, capital, insurance, and financing due to changing preferences of financial market participants. Potential limited or discontinued investments, insurance and funding to oil and gas companies. Medium and Long-term
Market Evolving consumer preferences for lower-carbon energy may lead to lower sales volumes and/or margins. Reduced oil and gas demand may impact revenues, asset values, and long-term competitiveness. Medium and Long-term
Challenges to accessing the grid/electrification of assets. Potential to increase operational and project costs related to  additional permitting and compliance and increased carbon tax, if applicable. 
Technology Technology availability, affordability, access or disruption. Potential to affect operational efficiency, costs, and project delivery. Medium and Long-term

Read more about our SD Risk Register.

Our position

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