Hess Corporation

Hess’ management of climate change issues requires strengthening. Although the company has established board-level oversight for climate issues and has set emissions reduction targets, its climate strategy takes an unambitious short-term approach mainly focusing on operational efficiency. Further, the company’s executive compensation is still coupled to fossil fuel growth, and its long-term strategy and CapEx focus on upstream ‘low-cost, high-return’ sites in Bakken and Guyana. Hess will need to make significant strategic changes to transition away from oil and gas activities and align with the level of change required by its 1.5°C pathway.

Hess has not set a target to reduce its scope 1, 2 and 3 emissions. Its targets for scope 1 and 2 emissions are either too short-term or have too limited a coverage, focusing on methane only, to be assessed for alignment with the company’s 1.5°C pathway. Hess should endeavour to set long-term targets that are aligned with its 1.5°C pathway for both its scope 1 and 2 and its scope 1, 2 and 3 emissions, along with regularly spaced intermediate targets to incentivize near-term action.

Hess has been increasing its share of oil extracted in emissions intensive regions like Libya and the USA, whilst extraction in less emissions-intensive regions such as Norway, has declined. This places the company’s scope 1 and 2 emissions intensity at an increasing divergence from its 1.5°C pathway. The situation is exacerbated by the company’s lack of financial commitment to low-carbon technologies and lack of membership in initiatives and partnerships to reduce emissions, such as the Oil and Gas Climate Initiative, Zero Routine Flaring Initiatives and the Climate and Clean Air Coalition’s Oil and Gas Methane Partnership. The company should invest in low-carbon technologies and focus on transitioning its activities away from fossil fuel extraction.

Hess’ strategy is focused on reducing its scope 1 and 2 emissions through efficiency improvements and leak detection technology. However, the company does not report any information on capital expenditure (CapEx) in these areas, which suggests that it may not be allocating the necessary capital to deploy low-carbon technologies to achieve emissions reductions. The sectoral expectation for oil and gas companies is that they should invest 77% of CapEx in low-carbon projects to be aligned with a 1.5°C scenario.

Hess publicly expresses support for the Paris Agreement. However, the company’s CEO is on the executive committee of the American Petroleum Institute (API), an association reported to have opposed numerous climate policies in the USA. API has pledged itself to fighting the Biden Administration’s commitment to halt new oil and gas development on federal lands, as well as efforts to phase out gasoline and diesel fuelled cars and trucks. Hess can add credibility to its climate rhetoric by setting a transparent policy governing actions that it intends to take if the trade associations it is involved with, like API, oppose climate policies.

At one of its sites in North Dakota, Hess has set a strategy to reduce flaring through infrastructure investment and technology-related solutions. This strategy has led to collaboration with suppliers that offer innovative solutions to meet Hess’s needs. This supplier engagement represents a small portion of Hess’ overall procurement spend. The company should scale up its North Dakota supplier strategy into a business-wide strategy, demonstrating its commitment towards collaborating with suppliers on low-carbon technological innovation to achieve decarbonisation across the production life cycle.

Hess has set three near-term low-carbon commitments. By 2020, the company aims to achieve a 25% reduction in its scope 1 and 2 emissions intensity and a 50% reduction in its flaring intensity. By 2025, the company aims to achieve a methane emissions intensity of less than 0.47% for its onshore sites in the USA.

Hess is improving its operational efficiency and mitigation technologies and making renewable energy credit purchases to reduce its methane and other scope 1 and 2 emissions. The company has not reported the amount of CapEx it intends to allocate towards these mitigation technologies.

Hess’ strategic focus is on its ‘low-cost, high-return’ oil and gas sites in Bakken and Guyana, which are set to receive more than 80% of the company’s capital in the long-term. Despite being the focal point of Hess’ forward planning, these sites are not covered within the scope of its climate targets as these sites are operated by partners.

Although Hess’ oil and gas production volumes declined between 2014 to 2019, the company increased the proportion of its oil mix that comes from regions with higher emissions intensity, such as Libya. An increasing share of gas in its sold product mix put the company’s scope 1, 2 and 3 emissions intensity on a slight downward trend.

Hess’ ambition is inadequate to align with the rate of change that is required by its 1.5°C pathway. The company’s climate strategy only has a near-term focus on efficiency. The company has not made any long-term commitments to transition away from oil and gas activities towards low-carbon business activities.