Climate Change Management
Climate Strategy and Targets
Climate change may impact the environment and PTTEP's business, in terms of more frequent natural disasters, stringent national and international policies and regulations, and a drive towards low carbon future.
PTTEP has continuously initiated actions to reduce and mitigate risks, including an increase in the investment proportion of natural gas as a cleaner transition energy and studies to find ways to reduce greenhouse gas (GHG) emissions. In addition, to support Thailand’s goals to achieve Carbon Neutrality and Net Zero Greenhouse Gas (GHG) Emissions as committed at the 26th United Nation Climate Change Conference of the Parties (COP26), the Company has set the target to achieve Net Zero GHG Emissions by 2050 for E&P business covering scope 1 and scope 2 under PTTEP’s operational control. PTTEP also set the targets of reduction of greenhouse gas emissions intensity by 30% by 2030 and 50% by 2040 from 2020 base year.
To achieve the target, PTTEP implements the GHG emission reduction projects by means of flare/excess gas recovery and utilization, energy efficiency improvement, production efficiency improvement and methane leak reduction. In addition, recognizing that greenhouse gas emissions will affect business expansion, PTTEP in collaboration with the PTT Group launches an internal carbon pricing scheme for investment decision-making process especially in projects that may emit significant GHG volume. Additionally, to achieve the target PTTEP has focused on research and development about Carbon Capture Utilization & Storage (CCUS) together with GHG emissions reduction from the operations. Examples of the CCU projects during the research and development are the conversion of CO2 to Carbon Nanotube and Cyclic Carbonate, respectively, etc.
PTTEP's operational transparency reflects in the inclusion of climate change strategy and performance in the annual reports and sustainability reports. PTTEP has also disclosed environmental and climate change-related performance to CDP since 2010. PTTEP has been ranked at "Leadership Level" for the 7th consecutive years since 2014, and "Management Level" in 2021, reflecting its environmental stewardship compared to its peers.
As a company's vision to become an "Energy Partner of Choice", PTTEP recognizes the importance of collaboration with other Thai and international organizations to create positive climate action. PTTEP has committed to engage with third parties including Thailand Greenhouse Gas Organization (TGO) on climate policy under UN Global Compact's Guide for Responsible Corporate Engagement in Climate Policy. PTTEP is seeking opportunities to reduce or offset GHG emissions through various channels. For instance, PTTEP buys carbon credit in support of TGO's carbon credit market to offset the emissions for internal activities; launches a reforestation project to capture carbon, participates in TGO's Low Emission Support Scheme (LESS) by initiating energy efficiency projects and applies the 3Rs principle (Reduce, Reuse and Recycle) in waste management.
Climate Risk Management
Company has fully integrated the Task Force on Climate-related Financial Disclosures (TCFD) framework into its climate change management as shown in the Mapping Index for TCFD Alignment. Furthermore, PTTEP takes risks that may result from climate change into serious consideration, treating it as the Company's emerging risk. In 2021, PTTEP reassessed risks with context-specific for timely improvement across all-new operation assets, upstream & downstream activities, and clients and for compliance with modified requirements both at national and international levels. Assessed climate change risks consist of physical risks and transition risks. Physical risks are related to direct impacts such as heat waves, heavy precipitates, tropical storms, drought and water-related risks. Transition risks are related to changes of risks of policy, legal, technology; market; and reputations. The assessment covers short-term risks (2020 - 2025), medium-term risks (2025 - 2035) and long-term risks (2035 - 2050).
In the assessment of physical risks, 3 scenarios are applied as guided by the Intergovernmental Panel on Climate Change (IPCC): aggressive mitigation scenario or representative concentration Pathways (RCP 2.6); strong mitigation scenario (RCP 4.5); and Business-as-usual (BaU) scenario (RCP8.5). The assessment results of corporate physical risks in all scenarios and all timeframe are ranked in between low to medium level.
In the assessment of transition risks, 3 scenarios are applied: Stated Policies Scenario (SPS - previously known as “New Policies Scenario (NPS)”, the underlying assumptions and modelling methodology remain unchanged), Sustainable Development Scenario (SDS) and IPCC's 1.5°C scenario. The first two scenarios are in line with International Energy Agency (IEA)'s impact assessment guidance and the last with IPCC's guidance. The assessment results of corporate transition risks in all scenarios and all timeframe are ranked in between low to medium level.
Based on the assessment results in 2021, the risks of the Company maintain at the same level. As such, the Company is confident that its climate risk management is appropriate and aligned with the global target to hold temperature increase to well below 2 degrees Celsius. The Company closely monitors and tracks climate change that may affect corporate risk level, as a result of the COP26 and Thailand's commitment on Net Zero target, in order to manage risks by the balancing the risk appetite level and corporate sustainable development. In addition, PTTEP has developed a Climate Management Plan in response to the Company's physical and transition risks. The plan is an integration of mitigation, adaptation, and resilience actions to allow its understanding on vulnerabilities to climate, manage the risks posed by climate change, place us in a strong position to increase resilience to potential threats, and exploit new business opportunities.