Task force on climate-related financial disclosures ('TCFD')

The Group welcomes the initiative for increased governance and transparency in general, and specifically in relation to climate change.

The Board recognises the increasing societal, media and investor focus on climate change, and the desire to understand its potential impacts on the oil and gas industry through improved disclosure, utilising mechanisms such as those proposed by the Task Force on Climate-related Financial Disclosures (‘TCFD’). The table below provides information relevant to each of the four TCFD recommendations, and the Group will continue to evolve these disclosures over time.

 

 

TCFD framework

EnQuest disclosures

2019 Annual Report page reference

Governance:

  

Describe the Board’s oversight of climate-related risks and opportunities

Describe management’s role in assessing and managing climate-related risks and opportunities

EnQuest’s purpose is to enhance hydrocarbon recovery and extend the useful lives of assets in a profitable and responsible manner, helping to fulfil energy demand requirements as part of the transition to a sustainable lower-carbon world. The Board takes seriously its roles in promoting the long-term success of the Group, generating value for shareholders and having regard to the interests of other stakeholders.

The Board has established a Risk Management Framework (‘RMF’) to enhance effective risk management within the Board approved statement of risk appetite, while the Group’s Safety and Risk Committee (a sub‑Committee of the Board) provides a forum for the Board to review selected individual risk areas in greater depth and climate change related issues are considered within the context of a number of risk areas. During 2020, the Committee will consider whether ‘climate change’ should be categorised as a discrete principal risk in its own right in addition to the recognition already accorded to climate change related issues across the existing principal risk areas.

The Executive Committee reviews and updates the Group Risk Register quarterly based on the individual risk registers of the business.

As part of its strategic, business planning and risk processes, the Group considers how a number of macro-economic themes (of which several are increasingly influenced by climate change) may influence its principal risks.

In 2019, an ESG steering group, comprising members of the Executive Committee and other appropriate managers, was established with the responsibility to consider how the Company could improve its greenhouse gas emissions, looking at measurement, appropriate metrics and methodology. From this work, specific emissions-related project opportunities and targets will be established, recognising the ability to reduce carbon emissions is constrained by the original design of the Group’s later-life assets.

Pages 44 to 53, 58 to 92 and 96 to 101

Strategy:

  

Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term

Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning

Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario

EnQuest’s business model is distinct from companies that have a material exploration component to their business and it is, therefore, less exposed to the much longer duration of exploration, discovery, development and production. EnQuest primarily acquires mature and underdeveloped assets from other industry participants and drives performance improvements, including the reduction of carbon intensity and emissions, through short-cycle, quick payback investments. As majors and other operators continue to shift their focus from mature basins such as the North Sea and Malaysia, there will be further opportunities for the Company to access additional resources. The combination of short cycle-investments and long-term energy demand scenarios forecasting hydrocarbons to remain an important part of the energy mix, there is a reduced risk of ‘stranded assets’ within EnQuest’s business model.

The most material risk factor to EnQuest’s business model is the oil price, and climate change is one of many potential influencing factors on the oil price. EnQuest’s planning and investment decision processes cater for low oil price scenarios, and include a carbon cost associated with forecast emissions.

In the short term, EnQuest reviews the impact of different oil prices in its going concern and viability statements.

Pages 2 to 25, 32 to 33 and 48

Risk Management:

  

Describe the organisation’s processes for identifying and assessing climate-related risks

Describe the organisation’s processes for managing climate-related risks

Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management

As outlined within the Governance section above, the Group has robust risk management and business planning processes that are overseen by the Board and the Executive Committee in order to identify, assess and manage climate-related risks. Through Oil & Gas UK and other industry associations, the Group engages with government and other appropriate organisations in order to keep abreast of expected and potential regulatory and/or fiscal changes.Pages 44 to 53

Metrics and targets:

  

Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (‘GHG’)

Describe the targets used by the organisation to manage climate-related risks and opportunities, and performance against targets

EnQuest has reported on all of the emission sources within its operational control, as required under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013 and The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

In the UK, we publish our annual Environmental Statement in line with the regulatory requirement under the OSPAR recommendation 2003/5. These statements, which can be found in the Corporate responsibility section on our website www.enquest.com, are an open and transparent representation of our environmental performance across our offshore operations.

The ESG steering group is in the process of developing specific emissions-related project opportunities and targets, recognising the ability to reduce carbon emissions is constrained by the original design of the Group’s later-life assets. These are anticipated to be published later in 2020.

Pages 35 to 37 and 100 to 101