The Press and Journal (Aberdeen and Aberdeenshire)
Sizeable fossil fuel production still in bosses’ interests
Anew report suggests Big Oil continues to link executive pay to increased fossil fuel production, even if this conflicts with energy transition targets and climate policies.
Published by think tank Carbon Tracker, the Crude Intentions II report finds that all but one of the 25 largest listed oil and gas companies incentivise their management teams to increase fossil fuel production and assume that hydrocarbon demand will continue to grow.
It finds that in 2022 – the latest year for which full data is available – seven companies had remuneration policies where volume growth metrics made up 30% or more of target variable pay.
Of these, PetroChina – the listed arm of state-owned oil group CNPC – was the most growth-oriented, with two-thirds of its target variable pay decided directly or indirectly by volume growth.
Yet European firms also have “a high proportion” of pay weighted towards growth metrics, with Eni (29%), Repsol (23%) and Shell (23%) singled out.
Moreover, the authors contend that some companies with the most ambitious climate policies – Eni and Repsol have both pledged Scope 1, 2 and 3 emissions cuts in the region of 30-35% by 2030 – “are among the worst offenders”.
While only some firms have disclosed 2023 plans, the same two companies increased their relative shares of growth metrics, while Chesapeake and BP made reductions and Shell removed them outright.
The International Association of Oil & Gas Producers (IOGP) – a global industry trade body – declined to comment on the findings.
A spokesperson for Eni said: “Hydrocarbon production accounts for only 12.5% of the Short-Term Plan, while it is completely absent in the Long-Term Share-based Incentive Plan.
“Since the Short-Term Plan (annual and deferred quota) accounts for approximately 38% of the CEO’s total target remuneration, the impact of the production parameter on the total target remuneration is equal to 4.75% (38% x 12.5%).
“We would also like to highlight that energy transition and decarbonisation targets account for 25% of the Short-Term Plan and 35% of the Long-Term Share-based Incentive Plan.”
The only outlier in Carbon Tracker’s list is US-listed Occidental Petroleum, which did not link growth metrics with remuneration – although its late 2023 acquisition of rival CrownRock will still see its production base grow.
Meanwhile, of the six global supermajors, five are planning to either increase production or keep it level over the medium term.
Even BP – which had vowed to make production cuts – has scaled back its 2030 targets from a 40% cut to 25% of 2019 levels.
The report – the first edition of which was published in late 2022 – also notes that many companies, including BP, Chevron, ExxonMobil and TotalEnergies, have framed their strategies around transition, but still include incentives to grow production.
In many cases, metrics aimed at driving “low carbon” investments are linked to gas and LNG badged as “transition” fuels – making them “effectively volume growth metrics under different names”.
And of the companies which have emissions reduction remuneration metrics in place, just five directly match wider corporate targets.
Of these, four cover just Scope 1 and/or 2 emissions, while only Shell has an incentive towards its Scope 3 emissions target
None of these targets link to the finite limits of the remaining carbon budget, the report found.