Pioneer believes that setting an internal price on carbon is an important step in assessing the resiliency of our assets.
The global energy landscape is undergoing a transformational shift to a lower-carbon future. While the direction of the energy transition is clear, recent global events have complicated the precise pathway and the length of time this transition will take.
The Russia-Ukraine conflict has exacerbated existing energy shortfalls and shifted international focus away from the energy transition and towards energy security, as nations reassess supply arrangements and seek to secure energy supply from reliable and sustainable sources, combined with combatting the inflationary effects of supply chains disrupted by the Russian-Ukraine war and global pandemic. Historical underinvestment in finding and developing new energy sources, including low-carbon sources, has led to rising energy prices around the globe, pushing developed and developing nations alike to fall back on higher-emission intensity energy sources like coal in certain instances. To overcome these challenges, there is a clear need for reliable and responsibly developed energy sources in the U.S. and abroad.
Pioneer seeks to meet this need by providing low-cost, responsibly sourced energy to the world. Pioneer’s business strategy is to be the leading independent energy company, which includes maintaining industry-leading sustainable development and environmental stewardship efforts. We are proactively managing climate-related risks by employing leading operational practices, deploying emissions-reduction solutions, collaborating with companies throughout our value chain and investing in emerging technologies to enable Pioneer to thrive during the energy transition.
These recent market shifts highlight the importance of conducting scenario-planning to ensure that Pioneer’s capital investment decisions are made after evaluating a variety of future scenarios and under various commodity price environments. As our internal processes mature, Pioneer seeks to continue building on TCFD scenario analysis, further incorporating climate-related considerations into our existing processes, business strategy, decision-making and culture.
Key components of this strategy include:
- Implementing a $50 per tonne CO2e internal carbon price on Scope 1 and Scope 2 emissions in our capital investment decision process and standardizing the evaluation process of carbon- reduction initiatives throughout the company
- Reporting results of our risk assessment to determine the physical climate risk exposure of our asset position over a variety of risk perils, using varying climate scenarios over multiple time horizons
- Executing our energy transition investment strategy that seeks to advance energy technologies through direct investment and partnerships with select, energy transition-focused funds
Pioneer’s approach to strategic planning is designed to enable better decision-making throughout the energy transition, while positioning the company to deliver long-term shareholder value through the responsible deployment of capital and talent.
Carbon Pricing
Pioneer’s assets are in the Permian Basin of West Texas and therefore not currently subject to a regulated carbon price. Nevertheless, Pioneer believes that setting an internal price on carbon is an important step in assessing the resiliency of our assets. In 2022, we implemented an internal $50 per tonne price on Scope 1 and Scope 2 GHG emissions to assess investment decisions and test the financial resiliency of our assets in a shifting regulatory landscape. The price was based on a benchmarking study that evaluated large E&Ps, existing carbon markets, public climate scenarios from the IEA and government standards like the U.S. Social Price of Carbon. In addition to setting an internal price on carbon, Pioneer also utilizes third party carbon price scenarios to assess potential future impacts to our business.
Integrating Climate into Strategy and Planning Processes
Pioneer leverages a robust strategic planning process divided into short-, medium-, and long-term perspectives. These timeframes allow for future action plans to be prioritized and aligned around a cohesive strategy that includes:
- Maintaining a strong balance sheet and financial flexibility
- Returning free cash flow to shareholders via dividends and share repurchases
- Utilizing the company’s scale and technology advancements to reduce costs, improve efficiency and create value
- Delivering profitable production and reserve growth through drilling, completion and production improvement activities
- Setting high expectations for employees and contractors to perform their jobs in a safe and environmentally responsible manner
- Maintaining industry-leading sustainable development and environmental stewardship efforts that mitigate climate change risks, with a focus on the company’s operational activities
- Adopting leading governance and employee engagement practices, including embracing diversity and inclusion, and supporting the comunities in which we live and operate
- Partnering with suppliers that are committed to maintaining their environmental stewardship efforts
- Leveraging private equity and venture capital partnerships that focus on carbon emissions reduction, efficiency improvements and the energy transition