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As we embark on 2022, it seems as though industry talk is dominated by two subjects: increased M&A activity in response to rising commodity pricing and improved ESG (Environmental, Social, and Governance) performance in response to pressures from investors, stakeholders, and governments. These project to be two of the biggest challenges and opportunities in our industry going forward, and for proactive companies, the two subjects are beginning to intersect.
“How 2021 became the year of ESG investing” was the title of an article posted by Reuters on December 23, 2021. In it, they detailed “a record $649 billion poured into ESG-focused funds worldwide through Nov. 30, up from the $542 billion and $285 billion that flowed into these funds in 2020 and 2019.” While funds like these were rising in profile throughout the year, our industry dealt with challenges such as major pension funds like Caisse and ABP divesting from oil assets completely.
Energy companies have responded by increasing their level of ESG accountability, making ESG statements to shareholders a regular part of their reporting. While ESG is a blanket term covering a whole host of corporate responsibilities, when it comes to oil and gas companies, often the biggest area of concern is the Environmental side of ESG. And when it comes to the “E” in ESG, perhaps the biggest area of concern is emissions.
Emissions generate a lot of headlines these days, from major E&Ps announcing reduction programs and net-zero commitments to world leaders announcing emissions goals with rapidly approaching deadlines in global summits. Our industry has responded with innovative technology, operational targets, and corporate commitments.
However, while companies are getting serious about their internal emissions operations and goals, if they’re not doing the same with their A&D work, their Emissions management/ ESG teams and their A&D teams might find themselves working at cross purposes. When examining a potential acquisition, are you looking at its emissions considerations? How would this asset affect your corporate emissions goals and intensity targets? When divesting, could higher emitting assets or assets with low gas conservation rates play a role in the deal? If you are taking emissions into consideration when doing A&D work, how easy is it to get the data you need?
As emissions and ESG grow in importance in our industry, emissions analysis needs to be a part of regular, proactive decision-making, not just something addressed in an annual sustainability or ESG report. As a result, A&D teams and corporate leadership need to expand their analysis to factor in:
- Proforma GHG scenarios and risk analysis
- Effects on intensity commitments
- Emissions-related costs and opportunities
- Lender, Investor considerations
- Regulatory factors
- Emissions-related arbitrage opportunities
- Transparent, unbiased 3rd party data
- And more!
XI Technologies has been at the forefront of A&D scoping for over a decade, with AssetBook as the leading provider of public data in the WCSB. Our recently launched Emissions module provides evaluators with the data they need to easily incorporate emissions assessments into their A&D workflows. To find out more about how this tool can aid your strategic acquisition identification and evaluation, visit our website or contact us for a demo.