Business and Strategy

Climate-related risks have the potential to impact our business in several ways. Our SD risk management processes identify those risks and assess the potential size, scope and prioritization of each. We have aligned a description of these impacts with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Products and Services

Compliance with policy changes that create a GHG tax, fee, emissions trading scheme or GHG reductions could significantly increase product costs for consumers and reduce demand for natural gas- and oil-derived products. Demand could also be eroded by conservation plans and efforts undertaken in response to global climate-related risk, including plans developed in connection with the Paris Agreement. Many governments also provide, or may in the future provide, tax advantages and other subsidies to support the use and development of alternative energy technologies that could impact demand for our products. However, there are also opportunities associated with increased demand for lower-carbon energy sources such as natural gas to displace coal in power generation and in combination with carbon capture and storage in the production of hydrogen for industrial use.

Our scenario analysis indicates that as the energy sector transitions, it will be important to be competitive on both cost of supply and GHG emissions intensity. We have adjusted our portfolio to concentrate on lower-cost production and have divested some of our natural gas and oil sands fields with higher emissions intensity. We have also set a GHG emissions intensity reduction target for our Scope 1 and Scope 2 emissions.

Supply Chain and/or Value Chain

We engage with suppliers on the environmental and social aspects of their operations through each step of the procurement process, from supplier prequalification through supplier performance evaluation. This includes communicating our expectations and priorities and identifying opportunities for improvement and collaboration related to climate issues, including energy use, GHG management and environmental supply chain risks. We continually work with suppliers to find opportunities for GHG reductions in our operations and engage with them for alignment with our energy transition plan. We engage with suppliers through the bidding process with questions on supplier GHG emissions and their own Scope 1 and 2 emissions reduction targets.

We also engage through membership in several trade associations, such as IPIECA, that address climate-related issues through working groups and task forces that include downstream businesses as well as suppliers. We continue to monitor climate-related risks and opportunities related to our supply chain and value chain and believe that maintaining a global network of businesses and suppliers will mitigate physical climate-related risks.

Adaptation and Mitigation Activities

While our business operations are designed and operated to accommodate a range of potential climate conditions, significant changes, such as more frequent severe weather in the markets we serve or the areas where our assets are located, could cause increased expenses and impact to our operations. The costs associated with interrupted operations will depend on the duration and severity of any physical event and the damage and remedial work to be carried out. Financial implications could include business interruption, damage or loss of production uptime and delayed access to resources and markets. For example, a three-day shutdown of all U.S. Gulf Coast production would cause 732 MBOED in lost production. It is unlikely all our Gulf Coast area production would be affected, as our operations are located across a wide span of the coast including inland and offshore assets.

Business-resiliency planning is a process that helps us prepare to mitigate potential physical risks of a changing climate in a cost-effective manner. For example, in 2021, British Columbia, Canada experienced one of its worst fire seasons on record. The Montney development team has been making a concerted effort to situate pads within existing cut blocks where timber has been cleared to minimize the risk from increased wildfire activity. Similarly, in response to previous years’ increased wildfire activity in Alberta, our Surmont team undertook reactive forest fuel reductions near critical infrastructure. The team also installed a continuous monitoring sensor for particulate matter at our air quality monitoring trailer at Surmont to protect human health. In addition to mitigating fire risk, the Canada BU has addressed increased surface water flow from high-frequency and short-duration storm events in Surmont with increased on-site training for managing the movement of water from well pads and central processing facilities. This proactive surface water management is critical in preventing on-site erosion from damaging critical infrastructure.

In 2021, our Australia Business Unit conducted climate water catchment-level modelling to inform a drought risk assessment to determine future impacts to water supply. Results showed that long-term evaporation and long-term and severe drought duration are projected to increase over the next 30 years in the local area. To mitigate this potential risk, both ConocoPhillips and the local water authority are investigating supplementary water supplies from alternate sources. We will use results from this, and future updates to the risk assessment, to plan for water availability in future operations as we adapt our practices to a changing climate.

Climate change is also considered during new project design. In 2019 in our Alaska BU, we updated our Foundational Design Specification to increase the embedment depths for vertical support members and piles to align with predicted soil temperature trends. This revision updates the specification based on temperature trends and geothermal modeling predictions from 2020 through 2070. Use of the Foundational Design Specification continues to date.

Research and Development

Technology will play a major role in addressing GHG emissions, whether through reducing fugitive emissions or lowering the energy intensity of our operations or value chain. One way we incentivized and accelerated new technology development was through our involvement in the Carbon XPRIZE project in Canada, beginning in 2015. Seven of Canada’s Oil Sands Innovation Alliance (COSIA) member companies, led by ConocoPhillips Canada, partnered with NRG Energy, an integrated power company in the U.S., to back a global competition to research technologies to capture and transform CO₂ into valuable products. Ten finalist teams competed for $20 million, with the competition concluding in early 2021. Read and view more about the Carbon XPRIZE teams. The two teams that converted the greatest amount of CO₂ into products with the highest net value while minimizing their environmental footprint were selected as the grand prize winners.

Another way we support technology development is through our annual marginal abatement cost curve (MACC) process. The MACC process identifies and prioritizes our emissions-reduction opportunities from operations based on the cost per tonne of carbon dioxide equivalent abated. This data helps identify projects that might become viable in the future through further research, development and deployment. As a result of this work, we have focused our near-term technology investments on reducing both costs and emissions where feasible, such as improving the steam-to-oil ratio in the oil sands. Part of a new research and development effort is a multilateral well technology pilot, which enables the drilling of multiple lateral sections without the need for additional aboveground capital or additional steam injection, thereby reducing emissions intensity and operating costs.

Over the past four years we have spent more than $450 million on research and development, equipment, products and services which have reduced our GHG emissions. Large-scale commercial deployment projects include: 

• Eliminating the majority of methane emissions by using air, rather than natural gas, to drive equipment at our Montney development in Canada.
• Reducing emissions by electrifying plant and pad equipment in Alaska.
• Installing vapor recovery systems to capture methane emissions and avoid flaring in Lower 48.

Investments Which Reduced GHG Emissions

Technology Area	Stage of Development	2018-2021 Investments
Energy efficiency	Applied research and development	$4 million
	Pilot demonstration	$46 million
	Small-scale commercial deployment	$1 million
	Large-scale commercial deployment	$205 million
Methane detection and reduction	Applied research and development	$4 million
	Pilot demonstration	$2 million
	Small-scale commercial deployment	$13 million
	Large-scale commercial deployment	$31 million
Other Emissions Reductions	Applied research and development	$2 million
	Pilot demonstration	$8 million
	Small-scale commercial deployment	$3 million
	Large-scale commercial deployment	$137 million

Operations

We have acted to mitigate our Scope 1 and 2 GHG emissions for many years. Our first Climate Change Action Plan was introduced in 2008. In 2017, we introduced a GHG emissions intensity target to incentivize reductions in our production operations as well as project design, exploration and portfolio decisions. To date, this has resulted in a reduction of both our emissions intensity and our absolute emissions. Most of the reduction projects carried out since 2008 have paid for themselves through increased sales of natural gas. Around two-thirds of the projects relate to the reduced emissions of methane from reducing venting, updating plunger lifts or replacing pneumatic controllers. Following the success of our overall GHG intensity target, in 2022 we set a near-zero methane intensity target to further incentivize methane emissions reductions.

To continue reducing emissions, we have set up regional teams in North America, Australia, Southeast Asia and Europe to use the MACC process to identify energy efficiency projects for consideration in the Long-Range Plan. By evaluating our day-to-day decisions regarding flaring, drilling, completions and equipment use we have gained a sharper focus on energy consumption, along with increased revenue, reduced energy costs, reduced emissions and an improved overall cost of supply.

Read more about our MACC process and the Net-Zero Roadmap.