Part 1 – What Asset Buyers and Regulators Expect
When it comes to oil & gas mergers or acquisitions, ESG is now part of the deal. In fact, Deloitte’s M&A 2022 Trends Survey reported 70% of respondents consider ESG metrics important to target valuations. Moreover, these organizations are recalibrating their portfolios to view asset health and risk through an ESG lens. How did we get here?
In just the last 3 years, ESG evolved from a topic of debatable longevity to an unstoppable force that impacts the energy enterprise on multiple dimensions, including M&A. Many potential buyers now seek out deals that are “ESG accretive,” i.e., assets that enhance the buyer’s own ESG profile. Wall Street sentiment and an urgency to move rapidly to net zero have ushered in a new wave of ESG policy and emissions reporting requirements.
2022’s Inflation Reduction Act also introduced the Methane Fee, which will require emitters to pay $900 per ton of natural gas starting in 2024 (and escalates to $1,500 in 2026).
Today, the “E” in ESG (or environmental) is the principal concern in the oilfield. And it is shaping how energy companies produce natural gas as well as oil. Indeed, Permian oil production could soar to new levels driven by global demand and a war in Ukraine that has taken Russian barrels off the market, adding pressure for the US to live up to its swing producer status. But Permian oil production remains constrained by how much associated natural gas producers are willing to extract, gas that can’t be moved to market at scale due to midstream bottlenecks and can’t be flared because of ESG.
With so much new policy and interest around ESG, the list of reporting requirements that asset buyers and regulators expect has suddenly swelled leaving many teams caught off guard and asking questions:
- What are the regulations and how do I start meeting the requirements?
- What data should I capture and what technology is available to help me?
- How much will it cost to build an ESG organization, supporting IT and data infrastructure?
- What is the cost of inaccurate emissions reporting and failure to comply?
- Where can I find guidance and experience support?
Over the next few blog posts, we’re going to delve into the business and technology strategies your team can deploy to answer these tough questions. We’ll look at how the industry is responding to ESG with organizational change as well as the technology and digital trends that are bringing a new level of scrutiny to oilfield emissions and opportunities to better manage and report on ESG data. Plus, ways that Stonebridge Consulting can simplify and accelerate your ESG initiatives.
Have questions about ESG and how it impacts your organization and data management strategy? Reach out, Stonebridge Consulting is ready to provide expert guidance.