Analysis and News

Securities and ESG Investing: Guyana’s Offshore Players

BY ARMCORE VPI's Analyst: Govindra Raghubansi

Countries across the globe adopted 17 ambitious policy goals to end poverty, protect the environment, promote gender equality, and secure prosperity as part of the United Nations Sustainable Development Agenda.

The agreement, adopted in 2016, aims to meet its targets by 2030. One of these goals, known as SDG 7, aspires to provide everyone with affordable, reliable, sustainable, and modern energy. This has permeated the oil and gas sector through the need for environmental, social and governance (ESG) considerations.

The financial implications of the rise in ESG investing, underpinned by the SDG 7 goal, is now firmly in the consideration set of upstream and energy companies as they plan strategically for the decades to come. The energy transition will birth new markets and determine market winners and losers.

Global assets in environmental investment funds reached nearly 2 trillion USD in the first quarter, more than tripling in three years. Statistics from the Wall Street Journal indicates that investors are pouring 3 billion USD into these vehicles every day.

ExxonMobil (XOM)’s 2021 Energy and Carbon Summary highlights four measures that will be taken in light of ESG and Sustainable Development; Mitigating emissions in Company operations, Providing products to help customers reduce their emissions, Developing and deploying scalable technology solutions, Proactively engaging in climate-related policy.

ExxonMobil's emissions have decreased circa 13 percent between 2011 and 2020 due to increased energy efficiency and decreases in flaring, venting, and fugitive emissions. XOM is aiming for a 15 to 20 percent reduction by 2025 in greenhouse gas intensity in upstream operations. A 40 to 50 percent drop in methane intensity and a 35 to 45 percent reduction in flaring intensity will help to support this. The company currently trades at 58.30 USD which is 40.80 percent up from its YTD value.

Hess Corp reaffirms the importance of its sustainable business model as they are the only energy company on the 100 Best Corporate Citizens list for outstanding environmental, social and governance (ESG) transparency and performance. Hess has been on the list for 14 years in a row per Business Wire.

The company surpassed its 2015 five-year targets by reducing Scope 1 and 2 greenhouse gas (GHG) emissions intensity and has established five-year GHG reduction targets for 2025, including a 44 percent decrease in operational Scope 1 and 2 GHG emissions and a 52 percent reduction in methane emissions from 2017 according to its 2020 Sustainability Report. These goals go beyond the International Energy Agency's (IEA) Sustainable Development Scenario's 22 percent decrease in carbon intensity by 2030, which is in line with the Paris Agreement's goal of keeping global warming below 2 degrees Celsius. The company currently trades at 70.06 USD which is 32.6 percent up from its YTD value.

Tullow Oil plc 2020 Sustainability Report defines four pillars that will keep the company on its ESG path, these categories are: Safe operations (to ensure employee health and process safety), Shared prosperity (to build local/ community content and capacity), Environmental stewardship (to cater for the risks of climate change, spills and biodiversity problems relating to operation) and Equality and transparency.

Specifically for SDG 7 efforts, Tullow aims for a 40 to 45 percent reduction in emissions by 2025, Zero routine flaring by 2025 and a further “Net Zero” from Scope 1 and 2 emissions across their assets by 2030. Tullow also aims to be more accountable by ramping up its carbon accounting efforts. The company has interests in over 50 exploration and production licences across 11 countries and currently trades at 63.27 USD which is up 58.74 percent for the year.

These securities are all involved in Guyana’s offshore operation being major players. Additionally, they are all poised for the energy transitions as can be seen with their investments and strategic goals.

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