PETRONAS

Petronas has a 2050 target to reduce emissions from its operations by 100%, with an interim target to reduce scope 1 and 2 emissions by 25% by 2030 compared to 2019. However, the company still has not set any targets to cover all of its value chain (scope 1, 2 and3). The company should set more comprehensive targets which include its entire value chain, and should also have evidence of interim targets with gaps of no more than five years. Setting regularly spaced intermediate targets will incentivise near-term actions on longer-term goals.

Petronas is targeting an increase in its renewable’s capacity through Gentari, a new equity integrating sustainable energy solutions including renewable energy, green and blue hydrogen and green mobility. By 2030, Gentari is aimed to build renewable energy capacity of 30-40 gigawatts (GW); supply up to 1.2 million tonnes per annum of hydrogen and capture 10% market share across key markets in Asia Pacific. Petronas is also exploring Carbon capture and storage (CCS) opportunities and plans the first injection of carbon dioxide for commencement by 2026. With sufficient investment these low-carbon businesses, it will present an opportunity for Petronas to move away from its reliance on oil and gas.

The company has not committed to stopping oil and gas exploration and expansion of such. In 2021, its upstream presence extended across more than 20 countries, with 247 producing fields, 432 offshore platforms and 30 floating facilities. In 2023, 96 wells were planned to be drilled. The company also plans to fabricate new floating structures between 2023 and 2025. This does not align with the International Energy Agency (IEA) 1.5°C Net-Zero Emissions (NZE) by 2050 scenario, which does not allow for any expansion of producing assets beyond those sanctioned earlier than 2022.

Petronas has developed a low-carbon transition plan, however, it did not conduct a climate scenario analysis to inform its transition plan, as well as ensure the plan’s ambition is sufficient for a 1.5°C pathway. Petronas could improve this by conducting a scenario analysis to inform its transition plan. The company’s transition plan can also benefit from disclosing financial elements as well as considering a carbon price.

the company announced targets to reduce its scope 1 and 2 emissions by 100% by 2050 with two short-term interim targets, being: cutting greenhouse gases (GHG) emissions at 49.5 metric tons of carbon dioxide (MtCO₂e) for its Malaysia operations and increasing renewable energy capacity to 3,000 megawatts (MW) by 2024. It also has an intermediate target to reduce scope 1 and 2 emissions by 25% by 2030 and reduce methane emissions by 70% in value chain operations by 2030 compared to 2019.

The company announced four key reduction levers: zero routine flaring and venting; energy efficiency; electrification; carbon capture and storage. It is also scaling up its efforts in offering clean energy solutions to customers.

The company has not set emissions intensity reduction targets, but its scope 1 and 2 upstream intensity has been decreasing since 2017 and currently aligns with its 1.5°C pathway. In 2021, Petronas reduced operational emissions by 4.1 million tCO₂e, mainly from flare reduction, vent reduction and energy efficiency. However, company’s scope 1, 2 and 3 emissions are not decreasing in the rate required for the 1.5°C pathway. The company is projected to exceed its scope 3 carbon budget by 100% between 2022 and 2050.

In September 2021, Petronas established Gentari Sdn Bhd (Gentari) to deliver integrated sustainable energy solutions which include renewable energy; green hydrogen produced from renewables and blue hydrogen produced from gas with carbon capture; and green mobility. By 2030, Gentari is aimed to build renewable energy capacity of 30-40 GW; supply up to 1.2 mtpa of hydrogen; capture 10% market share across key markets in Asia Pacific.

The company’s transition plan is undermined by a lack of scope 3 targets, although Petronas claims it is working on understanding scope 3 emissions and their impact. The company has made progress towards reducing its scope 1 and 2 emissions intensity. It also started exploring a market for hydrogen as the future fuel of choice and carbon capture and storage (CCS). However, Petronas’s plans of increasing its oil production over the next five years show a critical lack of urgency to transition.

No evidence was found of the company’s commitment to social dialogue or of the categories of stakeholders the company engages with on a just transition. Furthermore, no evidence was found to demonstrate the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. No evidence was found of the company undertaking low-carbon transition planning to mitigate the social impacts of the transition on workers, affected stakeholders and its business relationships. Additionally, no evidence was found to demonstrate the company’s engagement in social dialogue and with stakeholders in its just transition planning.

No public commitment by the company was found stating its intention to create and support access to green and decent jobs as part of the low-carbon transition. Moreover, no evidence was found of the company’s action to promote these jobs in a way that ensures gender balance and inclusion of vulnerable groups. Additionally, no relevant disclosure was found of the company’s assessment of employment dislocation risks. The company has a commitment to re- and up-skill workers and stakeholders affected by the low-carbon transition and discloses the actions it takes in this regard. For instance, it offers training opportunities to its employees and programs specifically targeting youth education. Furthermore, the company discloses the measures it takes to embed equality of opportunity for women and vulnerable groups in these actions. It does this through programs bringing academic, skills and entrepreneurship training to low-income communities, as well as support for its leading women network. However, no relevant disclosure was found of a process for identifying skills gaps for workers and affected stakeholders in the context of the transition.

No relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders, nor how it contributes to social protection. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company commits to respecting human rights and discloses that it undertakes some steps of human rights due diligence. However, it can strengthen its disclosure on its human right’s due diligence process and engagement with affected stakeholders.

The company commits to respecting the health and safety of its workers and expects the same commitment of its business relationships. Furthermore, the company discloses some information about the diversity of its workforce. The company can however strengthen its disclosure on these and other decent work issues, including its living wage and working hours practices.

The company has a policy prohibiting bribery and corruption, and includes corresponding clauses in its contracts with business relationships. However, no other policies or commitments of the company related to key ethical business topics – personal data protection, tax, bribery and corruption, and lobbying and political engagement – were found in the public domain. This includes ensuring ethical business conduct throughout its operations and in its relationships with business partners.