Chesapeake Energy Corp

Chesapeake has a target to reduce its scope 1 and 2 emissions intensity by 33% by 2025 compared to 2019. However, there is a commitment gap of about 25% between Chesapeake’s targeted emissions in 2025 and where it is required to be to align with its 1.5°C pathway. The company has not set a target covering its scope 3 emissions and it lacks intermediate targets between its target for 2025 and its net-zero goal for 2035. The company should increase the ambition of its existing target in line with its 1.5°C pathway. It should also set targets covering its scope 3 emissions as well as intermediate targets between 2025 and 2035.

Chesapeake’s management of climate change issues is limited. There is no clear evidence that the company has a board member or committee with oversight for climate issues. Moreover, its executive compensation is still tied to fossil fuel growth with no incentives for the management of climate issues. Chesapeake needs buy-in from the strategic level if it is to align with the requirements of the low-carbon economy. For a successful low-carbon transition, the company should ensure climate-related issues are governed and incentivised from the top down.

Estimates indicate that Chesapeake is one of the few companies expected to remain within its 1.5°C carbon budget for locked-in scope 3 emissions from its upstream activities between 2019 and 2050. However, the company may still be at risk of exceeding its carbon budget if it begins production at new oil and gas fields. Chesapeake should use the opportunity to halt exploration and development of new oil and gas projects and manage a decline in production from its current assets to remain comfortably within its carbon budget.

Despite having set a net-zero commitment that will undoubtedly require the use of low-carbon and mitigation technologies, Chesapeake does not disclose any information relating to its capital expenditure (CapEx) towards such technologies. In order to roll out low-carbon technologies at the scale required to achieve a 1.5°C scenario, there is a sectoral expectation that oil and gas companies should allocate 77% of CapEx towards low-carbon and mitigation projects. Chesapeake should commit to a CapEx plan over the next five years, and beyond, that aligns with this expectation.

Chesapeake has committed to achieving net-zero scope 1 and 2 emissions by 2035, as well as a 47% reduction in methane losses and 33% reduction in scope 1 and 2 emissions intensity by 2025 compared to 2019. The company has not set a target covering its scope 3 emissions.

Aside from setting up the use of methane leak detection equipment, Chesapeake has done little in the way of low-carbon transition planning. The company has not set a clear road map to meet its net-zero goal.

Chesapeake’s current business is entirely reliant on fossil fuels. It does not report any low-carbon related CapEx or research and development (R&D) expenditures.

Between 2014 and 2019, the ratio of gas to oil in Chesapeake’s extracted volumes changed from 85:15 to 75:25. The increasing share of oil has led to the company’s scope 1, 2 and 3 emissions intensity being increasingly out of line with its 1.5°C pathway, as oil has a higher in-use combustion factor than gas.

Although Chesapeake has set a net-zero commitment, the company does not appear particularly concerned with decarbonisation. The company lacks a road map to deliver on its net-zero goal, and the increasing share of oil in its fuel mix is increasing the company’s divergence from its 1.5°C pathway.