Can E&Ps do better sustainability reporting and benchmarking - external and internal?

Oil and gas companies have been gathering and trying to compare business performance data and KPIs for many years - F&D costs/boe, Opex/per boe, Operational Efficiency. All of these terms have a direct impact on financial performance.

The idea of?sustainability related KPIs?is somewhat newer, such as the amount industrial companies flare or their greenhouse gas emissions.

With respect to Public Reporting, as found in Annual and Sustainability Reports and on Websites, our observation is that:

The major oil and gas companies’ reports are reasonably comprehensive but diverse and heterogeneous.

E&Ps’ reporting is, with only one or two exceptions, partial or incomplete or non-existent.

Reporting from ‘Foundation Industries’ such as cement or steel is indistinguishable from E&Ps.

With respect to ‘Bottom Up’ Reporting, our summary is:

The oil and gas industry is under intense scrutiny regarding GHG Emissions and flaring. Of all locations, the Permian Basin of Texas and New Mexico is the one most under the spotlight:

And yet, under-reporting by companies operating there – not just by a few percent but by at least several tens of per cent, sometimes much more, is widely observed in work by independent bodies (using satellites, fixed wing aircraft etc).

This is due in part to the fact that much reporting is based on ‘engineering estimates’ (ie idealised laboratory tests) and not operational measurements in the field.

In summary, a very small number of companies are doing well, trying hard; it would seem that rather more are ‘greenwashing’; and some are engaged in business as usual (BAU).

This should give investors a clue as to how to assess companies’ mitigation plans and promises with respect to flaring and GHG emissions!

With respect to internal benchmarking?- this is about understanding where we are with respect to competitors - and we do it by sharing data, which isn’t made public, with an average of company data, which is calculated by a trusted third party or regulator.

Benchmarking is useful for understanding where we are, and also for attracting investment, and demonstrating to the wider public and society that sustainability is an important factor that we compete on.

So far, operators in places like the North Sea can see average scope 1 emissions data for the region (covering CO2 emitted in their own operations, flaring and fugitive methane). But benchmarking could go much further.

The ultimate benchmark could be a number like CO2 emitted minus CO2 sequestered associated with every barrel, cubic foot or joule of energy sold - although that is such a complex number, there would need to be a way to see people's 'workings out' for it to have any credibility, which would be hard to do and maintain commercial confidentiality at the same time.

But on the way to getting there, perhaps we could benchmark some things like this:

1)?Efficiency of operational fuel usage. How much of the joules of energy you burn (e.g., diesel in generators) goes on to do useful 'work' like pumping fluids, and how much is lost through oversized equipment or unnecessary generation? Are you making the most of technologies like variable speed drives and batteries to use all of the power you generate in the most effective way?

2)?How much energy use is coming from onshore electricity,?or even onshore wind? Can this be put into a metric like fraction of power requirement supplied using a low carbon method.

?3)?Flaring -? do you have an operational strategy to understand the causes of why you need to flare, and the causes behind those causes? Are you reducing flaring requirement every year? How does this rate and amount compare to industry averages?

4)?Procurement?- what data to you gather about your suppliers and how good is it? Does it let you choose suppliers which have lower emissions from their own operations?

5)?CO2 storage strategy?- on the expectation that all oil and gas producers (in Europe / US at least) will be required or strongly expected to implement CO2 storage at some point, is there a strategy, and could it ultimately balance out CO2 from all your operations?

6)?Customers?- do you monitor how much of your fuel is used to make plastics or any other possible non-CO2 emitting end uses?

7)?Monitoring vs reporting?- is your data gathering a project done at the end of every year, or something done on a continuous basis thereby, giving you tools to see problems emerging and make changes as they happen?

We could segment the oil and gas sustainability challenge into three time scales - long term (field development), medium term (investment in existing operations) and immediate term (how we are operating today). And of these, the immediate term may be the most interesting.

If you are interested in discussing how Future Energy Partners can you improve your sustainability reporting, please let us know by?filling in this form