US oil touts domestic ESG cred over Iran, Venezuela

The US oil and gas industry is positioning domestic crude production as the lesser of environmental evils, as it attempts to dissuade the administration of US president Joe Biden from easing sanctions on Iran and Venezuela.

A US ban on Russian crude imports earlier this month reframed talks to restore the 2015 Iran nuclear deal and rekindled diplomatic ties between Washington and Caracas, with market participants watching keenly for any developments that might offer incremental supply. But US oil and gas stakeholders claim a move toward Iranian or Venezuelan barrels would signal a step back from the kind of environmental, social and governance (ESG) standards consumers, politicians and investors have called for in recent years.

"If you really care about ESG, compare the United States to other jurisdictions," Hunter Hunt, chief executive of Dallas-based oil and gas company Hunt Consolidated, told Argus earlier this month. "We will have a higher commitment to the environment, a higher commitment to safety, and I think you will see a stronger understanding of all social concerns here in the US than you would see in Iran or Venezuela or other countries that potentially could fill the gap left by Russian barrels."

Hunt's comments echo those heard elsewhere in the industry. AFPM president Chet Thompson on 14 March called against relying on countries with "less stringent environmental and safety standards" like Iran or Venezuela for energy, while ExxonMobil chief executive Darren Woods earlier this month said "production will shift to somebody else with potentially higher emissions" if climate hawks push US companies into decreasing production.

Covid-19, investors drive change

US producers have in recent years attempted to tackle emissions as some major investors have decreased oil and gas investments due to concerns over the environmental impact of fossil fuel industries. The early 2020 drop in oil demand from the Covid-19 pandemic sped up that call for greater focus on ESG measures — along with better investor returns.

Companies including Chevron have responded to ESG concerns by committing billions to developing technologies like carbon capture, while the Oil and Gas Climate Initiative including ExxonMobil, Chevron and Occidental earlier this month set a goal to reach "near zero" methane emissions from operated assets by 2030.

The industry is likely to brandish such commitments as it attempts to guide the Biden administration away from easing sanctions on other countries and toward resuming oil and gas lease sales on federal lands, among other production-friendly policies.

"Technology has made [production] cleaner here in the US," Hunt said. "You have a greater commitment to methane capture and there are a number of things here in the US that we can do to really show the rest of the world we can bring on a lot of incremental production and do so with a minimal [carbon] footprint."

It is not clear if this attempt at an about-face will have much sway. The Biden administration has looked past recent ESG commitments by accusing US oil executives of profiteering off of a recent run-up in prices, with Senate majority leader Chuck Schumer (D) last week calling for public hearings to grill oil executives on their "excessive" profits.

But the Russia-Ukraine crisis should create added incentive for both sides to work more collaboratively, with the White House placing increased attention on energy security and industry members acknowledging a need to keep energy prices within reach of most consumers, Hunt said.

"The key is to stay out of prices that are so high it creates demand destruction and also prices that are so low that it creates chronic underinvestment like we have seen," Hunt said.

"We have a real opportunity with so many assumptions that have been set coming into 2022 being thrown out the window, but we cannot even get into a dialogue until both sides just quit shouting and start listening to each other."

By Dylan Chase