Page 5 - FSUOGM Week 06 2021

FSUOGM COMMENTARY FSUOGM

social and governance (ESG) ratings in particu- the CEO claimed that “Rosneft’s greenhouse gas
lar have become a key consideration among intensity per barrel of oil produced is below 30.
investors. In fact, it’s below many of the majors, including
“ESG is becoming an increasingly important BP.”
part of investment management, with portfolio Ultimately, the major is banking on Rosneft
managers required to devote a large and increas- and its other high-margin oil assets to generate
ing amount of time, we think, to justifying their the cash to realise its costly plans in renewables.
investments on an ESG basis as well as a return Rosneft’s strategy seems largely to run coun-
basis,” BCS Global Markets commented in a ter to BP’s green ambitions, however. While BP
research note. “Therefore, any such projects [like is looking to rein in its production over the next
those BP and Rosneft will work on] should be decade, Rosneft is targeting substantial growth.
considered a positive for the stock.” It is pushing ahead with plans for a new hub for
Rosneft has made significant strides in oil and gas production in the Russian Arctic.
addressing its environmental impact, analysts This project, known as Vostok Oil, is expected
tell NewsBase, partly because it has focused eventually to flow more than 2mn barrels per day
on low-hanging fruit like relatively simple-to- (bpd) of oil and as much as 50mn tonnes per year
achieve reductions in methane leakage. But (tpy) of LNG.
regarding its ESG score, Rosneft still has quite a Similarly at odds with BP’s green direction
lot of ground to cover. is the strategy of Aker BP, its Norwegian joint
The producer’s current ESG rating by US venture with Oslo-based investment group
financial firm MSCI is only BB, where as domes- Aker Capital. Reporting its fourth-quarter
tic rivals Gazprom and Lukoil have BBB scores results last week, Aker BP said it wanted to
and Novatek has achieved an A. Rosneft is at a remain a pure-play oil and gas producer. It is
natural disadvantage here, as it extracts signifi- targeting a 70% growth in its output by 2028
cant amounts of high-sulphur Urals oil and con- to more than 350,000 barrels of oil equivalent
trols many of Russia’s oldest oil infrastructure, per day (boepd).
which is less efficient and more polluting. In con- BP has adopted a more drastic strategy for
trast, mostly natural gas-producing companies confronting climate change than most other
like Novatek have a much easier task. leading oil firms. But investors seem somewhat
unconvinced with the company’s new direction.
Bankrolling the transformation Looney and other senior BP executives devoted
BP is reluctant to part with its 19.75% Rosneft more than 10 hours of presentations last Septem-
stake given the Russian company’s low lifting ber to elaborating on the major’s green plans. But
costs of only $3 per barrel, which fit with what investors appeared to remain sceptical, with BP’s
Looney has described as BP’s “resilient hydrocar- share price slumping to a 25-year low within a
bons” focus. In a call with analysts on February 2, week of the presentations. ™

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