OIL and gas (O&G) companies are showing an increased awareness and focus on environmental, social and governance (ESG) and sustainability aspects.
The complex interplay between drivers of change – ecosystem disturbance, deep decarbonisation and climate change – had pressed for collective action within the O&G industry in Malaysia.
Initiatives in the O&G industry are focused on reducing carbon emissions by shifting to low-carbon alternatives and utilising more efficient and low-emission technology.
More O&G companies are setting targets to reduce greenhouse gas emissions (GHG) over time and enhancing their corporate sustainability reporting practices including complying with the necessary sustainability standards.
Wah Seong Corp Bhd has a robust GHG emission tracking and monitoring programme in place; the data gathered is processed via its digital dashboard, showing areas that are the biggest contributors of GHG.
“Recognising that our operations will have residual emission after implementing all possible emission reduction initiatives, we are in the midst of completing the planting phase of our Wasco Forest.
“Carbon credits generated from this project will then offset the residual emission across our group operations,’’ said Wasco Energy group CEO Giancarlo Maccagno. (Wasco is an indirect, wholly-owned subsidiary of Wah Seong).
Under the first pillar of its energy transition strategy – portfolio resilience – Hibiscus Petroleum Bhd is increasing natural gas as a key component.
Natural gas is the cleanest form of fossil fuels and has been included by the European Union as part of their green taxonomy.
Through its acquisition of Repsol Exploracion’s Malaysian assets and Block 46 in Vietnam, Hibiscus has increased its natural gas production to 30% of its total production, from 4%.
“To reduce operational GHG emissions, Hibiscus is progressively replacing diesel-driven power generating equipment with solar photovoltaics and wind turbines to electrify its offshore installations.
‘’Decarbonisation efforts include running a pilot project in upgrading membranes used to reduce methane and other greenhouse gases from its emissions, as well as up-cycling and repurposing the topside of an existing platform instead of investing in a new build unit,’’ said Hibiscus co-founder and managing director, Dr Kenneth Gerard Pereira.
Under green and clean investments, Hibiscus has evaluated more than 40 opportunities over the past two years; it continues to assess a sizeable number of potential green, clean and low carbon investments that are sustainable and value accretive.
Such opportunities must deliver tangible, real returns and should not be subject to any criticisms of ‘greenwashing.’
As both developed and emerging economies return to normalcy, post pandemic, Hibiscus is prioritising the allocation of resources to the social and governance aspects of ESG.
It is working with communities in the geographies where it operates; efforts include provision of food baskets to those impacted by the pandemic, and medical support projects with the B40 community and schools.
In terms of governance, Hibiscus seeks to provide as much disclosure and transparency as possible relating to its operations and financial performance during these volatile times.
Gas Malaysia Bhd’s main product – natural gas – has been identified as a transition fuel to replace more polluting fuels.
For the past 30 years, Gas Malaysia has been instrumental in contributing towards carbon reduction in Malaysia via its business of building, operating and maintaining 2,706km of gas pipeline.
“In the effort to further expand the utilisation of lower carbon energy source in the country, Gas Malaysia is currently exploring the inclusion of biomethane from palm oil mill effluent to augment its gas supplies.
“Gas Malaysia is also promoting lower emission energy generation via its combined-heat-and-power (CHP) systems that generate both heat and electricity using only natural gas,’’ said Gas Malaysia group CEO Ahmad Hashimi Abdul Manap.
The CHP system uses about 32% less fuel and produces 50% less carbon emissions compared to coal.
O&G companies can make their operations more sustainable by embracing the use of big data and data analytics, where sustainability issues such as fuel consumption patterns, waste production and on-site incidents can be identified with more clarity.
The impact from methane emissions, a major cause of global warming, can be minimised via better use of technology such as 3D imaging to inspect oil wells and pipelines, as well as better equipment.
By utilising cleaner, renewable fuels and pledging on net-zero emissions, more O & G-related industries are in a better position to manage their carbon emissions.
O&G companies can align their reporting practices and standards with internationally recognised sustainability frameworks, to better disclose their sustainability matters especially their performance in meeting the relevant sustainability targets.
While the industry is seen to be focusing on being good stewards of the environment, O&G companies also need to initiate and implement programs covering a full spectrum of ESG.
Opportunities to improve in the social aspect include equal opportunity and workplace diversity, community support and impact management, as well as stakeholder engagement.
Meanwhile, corporate governance includes transparency in reporting, leadership diversity, executive compensation and shareholder rights.
As Malaysia is working towards putting a price on carbon, as announced in Budget 2022 and the 12th Malaysia Plan, investors in O&G companies can risk incurring a sharp loss in asset value, if they are not serious about building new capabilities in renewable and low-emission technology as well as fuels.
This energy transition is a long journey, and requires a combination of stakeholder willpower, enhanced and facilitative government policies and incentives as well as the right talent, to generate lasting and sustained results.