BAKU, Azerbaijan, May 27. With a growing focus on Environmental, Social and Governance (ESG) frameworks, financing oil and gas projects by banks and financial institutions is becoming more difficult, Trend reports with reference to the Gas Exporting Countries Forum (GECF).
“In the meantime, the oil and gas companies are under scrutiny from the shareholders and investors to do more on ESG requirements. Therefore, in line with international movements to reduce GHG emissions, upstream companies are shifting strategies to comply with ESG criteria (Table 2). As an example of rising pressure, in May 2021, a court in the Netherlands ruled the company, Shell, to cut its emissions level by 45 percent by 2030 compared to the 2019 levels. Due to all those pressures from environmentalists and the Netherlands’ government, the company decided to move its headquarters to London,” said GECF.
The analysts from GECF note that ESG affected IOCs in Europe and their counterparts in the US differently.
“Even though the US is the top upstream methane emitter, the US oil and gas companies are one step behind the European companies where ESG is concerned. Also, ESG affects IOCs and NOCs in different ways as their stakeholders are different.
The oil price collapse in 2014 and uncertainties on the future oil market have made the oil and gas companies look for alternative energy investment options. In this regard, they shifted their investment from upstream to clean energy activities and downstream after the oil price crash in 2014. Likewise, during the pandemic, upstream companies took similar measures. In addition to the attempts to cut their production costs and getting involved in more mergers and acquisitions to protect themselves from the negative impacts of the pandemic, they shifted their strategies to renewable sources to hedge themselves against future oil and gas price fluctuations. Also, they made changes in their structure by separating the legacy and energy transition businesses.”
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