Energean adapts for survival
Independent oil and gas firms have no choice but to respond to environmental pressures, says the firm’s CEO
Smaller players on the energy stage must be as bold as the industry’s heavyweights in heeding mounting public demands for action to combat climate change, Energean CEO Mathios Rigas tells Petroleum Economist. His advice to fellow independents is: adjust now or risk going out of business.
“Change is happening,” he says. “The pressure is on all of us on the planet, not just the E&P sector, to take climate change issues into consideration. Pricing climate change into a business is extremely important. In the past, risks were related mainly to oil prices. Now climate change is an additional factor.”
Based on his own firm’s experience, Rigas believes firms should shift their focus from oil to gas. Three years ago, Energean’s output was entirely oil. Today, natural gas’ share of total production is 80pc. “Gas, as a transition fuel, is the way forward,” he says, “until we get to the stage when the world can rely on renewables, or any other sort of energy, that will be as stable as hydrocarbons.”
During the transition period, independent producers also need to take seriously “the entire environmental, social and governance (ESG) criteria, because ESG is not just how much CO2 you are releasing into the atmosphere—it is your total position in the market with respect to the environment”. In addition, companies need to be scrupulous in being transparent and ethically correct, avoiding any hint of corruption.
While natural gas is a relatively clean fuel, it remains a hydrocarbon. Rigas, on the one hand, is promoting the need to protect the environment, while on the other his company is continuing to pursue new upstream opportunities. Does he feel comfortable with this apparent contradiction? “Absolutely,” he replies. “Not only do I feel very well within myself, I feel we are actually bringing about changes.”
Rigas cites as an example Energean’s $1.6bn investment in the Karish gas field in Israel’s offshore. This project “allows the Israeli government to switch off coal-fired power stations and convert to gas, a move that significantly improves the living conditions of the Israeli population”.
Even if independents are tempted to resist public pressure to change their methods, their financial backers may twist their arms. Rigas has noticed “a big shift”. “Banks and investors ask first to see our sustainability reports and ESG ratings. They want to be comfortable with the non-financial part of our business before they get into the financial part. Of course, investors also want returns, so they are looking to invest in greener companies that can produce those returns,” he says.
“Gas, as a transition fuel, is the way forward” — Rigas, Energean
Rigas does not approve of the tactics of Extinction Rebellion supporters in blocking streets and causing major disruption to daily life. But climate protests in general have raised public awareness and triggered vital discussions about how to face environmental challenges. “Any energy companies that ignore what is happening run a serious risk of becoming extinct. Some companies will not make it through this transition phase.”
The Energean chief calls for smaller independent firms to work together and share their experiences. “We have had a number of meetings with some of our peers, who are asking advice on how to get where we are today,” he says.
Another incentive for greater cooperation and coordination is the need to improve the image of the energy industry. Rigas is only too aware of the size of that task. “You go to a dinner party and say you work in the oil and gas business, and they all look at you as though you are a criminal who destroys the planet,” he laments. “And it is actually the total opposite. We are there to produce cleaner energy to allow the planet to become cleaner. We must work together to get the message across.”