REPORT: Half of Oil Majors’ Production Not Subject to Their Climate Targets
EDF analysis of non-operated joint venture oil and gas assets with state-owned companies shows emissions reporting from these assets remains opaque, leaving the management of methane emissions in underregulated global markets largely obscured and unknown.
A new report published today by Environmental Defense Fund focused on non-operated joint ventures (NOJVs) in the oil and gas industry finds that supermajors’ climate targets to reduce methane emissions only apply to assets they operate directly. Emissions from assets in which they have no operating interest are largely unmanaged and unknown in underregulated regions of the world. The report focuses primarily on NOJV arrangements where a supermajor partners with a national oil company (NOC), which are not subject to the regulatory, financial and public pressures that apply to supermajors.
NOJVs are central to how the oil and gas industry does business, allowing supermajors a share in valuable assets controlled by other companies – often state-owned entities – in exchange for the supermajor’s access to capital and technical expertise in exploration and production. The complicated nature of these governance structures makes complete emissions accounting nearly impossible, obscuring companies’ climate risk.
“Although supermajors have set targets to reduce their methane and flaring emissions, these targets only apply to assets they operate directly, which amounts to 50% of their total production portfolios,” said Felicia Douglas, energy manager at EDF. “Their remaining production is part of non-operated joint ventures, leaving a significant opportunity on the table for supermajors to raise the bar on methane action and scale emissions reductions quickly.”
Supermajors play a technical role in joint ventures with NOCs to develop oil and gas fields. They have an opportunity to lend technical expertise in NOJV partnerships to design, execute and evaluate an emissions strategy for each asset. Helping NOCs credibly demonstrate methane emissions reductions will significantly scale global methane reductions, and mitigate legal, regulatory, and reputational risks of all partners involved in an operation.
Regions where non-operated production is highest are also exposed to high levels of flaring, with the Middle East and Africa accounting for 45% of supermajor non-operated production volume and 50% of total global flaring. If supermajors extended their emissions reduction commitments to NOJVs, the percentage of international oil and gas production bound to climate targets would increase from 11% to 30% of production.
Addressing emissions from NOJVs is not only critical to reducing the industry’s methane footprint, but it will also help address the problem of transferred emissions during the M&A process by ensuring that climate stewardship is embedded across all assets and can withstand changes in ownership.
“Supermajors reap serious financial rewards from their non-operated assets, with little to no scrutiny on the associated emissions from these ventures,” said Andrew Baxter, director of energy transition at EDF. “The world’s largest oil and gas companies have a shared responsibility to extend their technical know-how and climate mitigation resources to state-owned companies to help them rapidly scale the reduction of greenhouse gas emissions across all of the world’s oil and gas assets, not just a small fraction.”
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