Emissions Reduction Target Principles
Our long-term ambition to reduce our operational greenhouse gas (GHG) emissions to net-zero by 2050 reflects how we see the company’s role in the global challenge to address climate change, meet energy demand and remain financially competitive. Ultimately, the aims of the Paris Agreement will only be met as part of a global collaborative effort based on country, sector, company and consumer actions. The Paris Agreement is set in the context of sustainable development broadly and based on Nationally Determined Contributions (NDCs) which are designed for each country’s circumstances, resources and capabilities and reflect varying economies, geographies, and energy supply and demand dynamics.
As country NDCs evolve, we will continue to constructively advocate for effective climate policy including Paris-aligned carbon pricing. We expect that as governments put in place policies to achieve their NDCs, policy and regulatory efforts may in fact supersede our voluntary corporate net-zero ambition. As we wait for policy and regulations to evolve, we will continue to carry out emissions reduction projects and lower the GHG intensity of our global operations.
Our medium-term targets include reducing GHG emissions intensity by 50 to 60% by 2030 and achieving a near-zero methane emissions intensity by 2030. These targets are based on our current asset portfolio, emissions reduction opportunities and view of the energy transition where oil and natural gas continue to make up a significant proportion of the energy mix over that period. Beyond 2030, there are key uncertainties including technology advances, NDC-driven climate policy and market developments that make it implausible to set specific commitments. We manage this uncertainty by using global energy models to develop transition scenarios that we monitor to adjust our strategy, business plan and targets over time. We see this as a credible way to establish how we are addressing the global climate challenge without choosing a single, yet to be determined, future pathway.
Like countries who may have different pathways to their NDCs, our pathway and targets may not be the same as other companies due to differences in asset mix, geographies, risks and opportunities. We want our employees, financial sector and community stakeholders to understand our goal to be resilient and competitive through the energy transition and for those stakeholders to have the confidence that our people, portfolio and strategic capability will meet the challenge.
Technical Details
What is GHG emissions intensity? Our performance is based on our GHG emissions, stated in carbon dioxide equivalent terms, divided by our production, stated in barrels of oil equivalent. Our 2030 target is set on both a gross operated and net equity basis, covering both the assets we operate and the assets where we have an equity ownership.
Which GHGs are included? The GHG emissions intensity target covers all GHGs, but in practice this will apply to carbon dioxide and methane emissions, as our other GHG emissions have not been material. We have also set a specific target for methane emissions. We use a Global Warming Potential of 25 to convert methane to carbon dioxide equivalency.
What are the target boundaries? The GHG emissions intensity target applies to both Scope 1 (process) emissions and Scope 2 (imported) emissions as these are the emissions that we have the most control over. It is not intended to cover Scope 3 (consumer) emissions as we do not control how our total production is ultimately processed into consumer products. The target only includes emissions that are strictly related to production. Emissions from activities such as Aviation and Polar Tankers fleets are excluded. This may give rise to small differences between the intensity we report for our GHG target purposes and the intensity we report for our annual metrics. Over the past five years, this difference has been less than 2%, or 1 kg CO2e/BOE.
When comparing against other companies, it should be recognized that our numbers comprise emissions from our broad-ranging exploration and production business, including natural gas processing plants, oil terminals, LNG plants, pipelines and compressor stations, and may not be directly comparable to smaller companies who do not operate such assets or larger companies who designate those assets as midstream or downstream. There may be occasions where we choose to invest in good quality emissions offsets to mitigate our emissions. As these become material, we will report our performance with and without the impact of these offsets in the interests of transparency.
What is the definition of methane emissions intensity? Our performance will be based on gross operated methane emissions, stated in carbon dioxide equivalent terms, divided by our gross operated production, stated in barrels of oil equivalent. This metric includes our methane emissions from both oil and natural gas production. Currently, we include the methane emissions reported in accordance with the regulations in the jurisdictions where we operate. Through our participation in the Oil and Gas Methane Partnership 2.0, our future methane estimates may be informed by directly measured methane emissions.
How do we define near-zero methane intensity? We have set a new medium-term target to achieve a near-zero methane emissions intensity by 2030. This near-zero target is defined as 1.5kg CO2e/BOE or approximately 0.15% of natural gas produced.
Is the target based on a range or a single number? It is a range, in common with many of the Paris Agreement NDCs which have been set as ranges. A range recognizes several uncertainties such as: our changing portfolio, changing commodity pricing, the ability to forecast long-term emissions with precision, technology development, and the speed and scope of GHG regulation implementation.
What is routine flaring? Routine flaring is defined as flaring that occurs during the normal production of oil in the absence of sufficient facilities to utilize the gas onsite, dispatch it to a market, or re-inject it. Flaring for safety reasons, non-routine flaring or flaring gas other than associated gas is not included as part of the World Bank Zero Routine Flaring initiative. The target applies to our operated new and existing oil field assets. New oil fields will be developed to incorporate sustainable utilization or conservation of the field’s associated gas without routine flaring. For existing oil fields with routine flaring, we will seek to implement economically viable solutions to eliminate flaring as soon as possible, and no later than 2025. Existing oil fields are those in production at the end of 2020. If we acquire an oil field with active, existing production, it will be considered an existing oil field, and we will seek to eliminate routine flaring no later than 2025.
Safety flaring can continue for as long as necessary to maintain safe operations without being re-classified to routine or non-routine flaring. A process upset event, including third party upsets resulting in flaring of associated gas that extends beyond 30 days, is considered routine flaring and must be justified by the business unit. Any other non-routine flaring event that extends beyond one year, regardless of conditions, must be approved by the vice president, HSE.
Why is the 2030 GHG target based on emissions intensity rather than absolute emissions? We are in a dynamic business environment where plans, technology, prices, industry structure and costs all change rapidly. As we learn new information, we often accelerate or defer projects, and we buy, sell or swap potential oil and gas developments to ensure that our portfolio is competitive. These actions could render an absolute target redundant. An intensity target that allows a company to change its plans without having to reset its target appears to be more durable.
This has been particularly true over the past few years, when the industry has been in a state of consolidation. In 2021, ConocoPhillips completed the acquisition of Concho Resources and the Permian assets held by Shell, which were significant additions to our portfolio. Had we set absolute emissions reduction targets, they would have needed to be adjusted to reflect the portfolio changes, making it harder to manage and potentially more confusing for stakeholders.
Our intensity target is based on our current asset portfolio, operational emissions reduction opportunities and view of the energy transition where oil and natural gas continue to make up a significant percentage of the energy mix. Providing oil and gas production that will best compete in any energy transition scenario is central to our company strategy. This production will be delivered from resources with a competitive cost of supply and low GHG intensity, as well as diversity by market and asset type. Our view is that GHG intensity, possibly by asset type (e.g., LNG, conventional, unconventional), will emerge as a useful metric for comparing company performance and ensuring the best barrels on both a cost basis and GHG basis are produced through the energy transition.
What uncertainties exist for GHG emissions intensity? First, we would expect GHG intensity of our older fields to increase through the next several years to 2030. (As natural gas and oil fields deplete, more energy is required to produce the same or lower volumes, while newer fields utilizing modern technologies are likely to operate at lower intensities.) Second, some of our reported emissions are the result of applying standard emissions factors which may underestimate or overstate our actual emissions. We expect industry technologies around emissions detection and monitoring to advance through this decade to reflect actual performance more accurately, which could also increase or decrease our intensity. Third, our portfolio will continue to change over time and, depending on the intensity of new production, our future short-term intensity could increase or decrease. However, by setting a medium-term 2030 target, we are committed to reducing our emissions intensity over time.