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How has one of the Largest Oil and Gas Producing Company, managed the Environmental, Social, and Governance Risks and Paved the Way Towards Sustainable Growth?

A Chinese company specialized in producing and distributing various LNG activities, liquid to gas fuels and crude oil refineries. The company had a strong presence in the domestic and international markets. However, the company had been focusing solely on short-term profitability and growth and was found neglecting environmental, social, and governance (ESG) practices. As a result, the company found itself at the receiving end of fines and penalties from regulatory bodies. This considerably damaged the company’s reputation and negatively impacted the stakeholder’s perception. The company approached Research Nester to draw out a plan of action to facilitate a smooth integration of ESG solutions into the company’s policies and practices.

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An overview:

1

The oil and gas company had been in the business for over a decade and a half and had become well-established with a strong market position. The company primarily was in the production of LNG, Gasoline, Gas Oil, Jet Fuel, and Fuel Oil.

2

An inquiry into its facility led to the discovery of its non-compliance with ESG practices. The company was fined and also penalized, which dented its reputation and also resulted in a loss of market share.

3

The company leadership requested Research Nester consultants for their intervention to help the company sail through this crisis.

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The Story

This large oil and gas company started as a small start-up. The company was incorporated in 2011. The company entered the world of business with enthusiasm and an ambition to be one of the largest oil and gas-producing companies. The Company had been engaged in energy and power products such as LNG, Gasoline, Gas Oil, Jet Fuel, and Fuel Oil. The company-built drilling sites and constructed roads which required the use of heavy equipment. As a result, the construction destroyed large amounts of land and vegetation which is used by wildlife and indigenous people of that area. Though fossil fuels contribute to the production of energy they have negative impacts. The burning of these fuels produces carbon dioxide. This harms the environment, human health and triggers major changes in the global climate. This upcoming hazard was soon detected by regulatory authorities. Since the company had entirely neglected the environmental, social, and governance protocols, in 2018, the company was booked under the Environment Protection Act, of 1986. As the news of its penalty spread, the company’s reputation suffered a significant blow.
Consumers became increasingly aware of the negative impacts caused by the company’s operations, which led to a decline in demand for its products. Concerned buyers started turning to competitors who prioritized long-term sustainable ESG practices. The company had been flouting all environmental, social, and governance norms which raised red flags for investors, hindering the company’s expansion and restricting the funding for innovations and sustainable initiatives. Finding themselves cornered and totally at a loss, the company leadership in December 2019, sought the services of Research Nester analysts to rework the company’s strategy to integrate ESG practices for sustainable growth and profitability.

Our Solution:

The major hindrance to the company’s viability and robust growth was its non-compliance with environmental, social, and governance protocols. Oil and gas production is already said to be responsible for a significant amount of land loss, degradation of natural habitats, loss of biodiversity, and global climate change. Research Nester consultants provided a brief insight into the environmental, social, and governance (ESG) scenario and also offered a customized solution in the form of an oil and gas accumulator market report that provided an in-depth analysis oil and gas market and the adoption of various ways to preserve the environment. RNPL consultants further suggested the following strategies that would work for incorporating ESG practices:

  • Drilling for oil may exploit the land by covering larger areas. Some techniques and technologies such as satellites, global poisoning systems, remote sensing devices, and 4D seismic techniques can explore oil reserves while lessening the drilling activities.
  • Directional drilling can be used for drilling multiple wells from a single pad, eradicating the need for constructing distinct good roads.
  • The connections can be tightened to lessen leaks.
  • Drilling fluids can be recovered and reused by reusing them in other areas for spudding or persisting and deserting operations.
  • Use bulk purchases of lower volatile solvents and liquid chemicals to ensure that containers are covered.
  • Inspection and maintenance programs can be used to identify leaking compressors, valves, connectors, and seals.
  • Keeping track of changing consumer demands and preferences.
  • Position itself as a responsible and reliable agricultural company, committed to Environmental, Social, and Governance practices.
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Results

Till 2019, the company recorded a stable growth of around 21%. However, the growth was derailed when the company faced heavy penalties for flouting ESG protocols. With the incorporation of strategies suggested by RNPL analysts, the company was able to transform its market standing and gradually build its reputation. The revenue for the year 2020 reached USD 42 billion, reflecting a growth of 31%, and gradually grew to 35% and 42% in 2021 and 2022 respectively. The company was finally able to bring its production and growth back on track and move towards sustainable and long-term expansion after the successful implementation of Research Nester’s solutions.

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Swara Keni

Head- Global Business Development

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