By Barney Smith
Greenbarrel shows its’ versatility by moving from the monsters of the oil world one week to a minnow the next. AIM-listed Zephyr Energy (whose worth is just under £47million @ the price of £3.84 on 9 June) announced on 7 June that it intends to achieve carbon-neutrality across its operational footprint by 30 September 2021. This industry-leading pledge is arguably a first step towards delivery of hydrocarbons with an operational “net-zero” carbon impact.
Zephyr will work with Prax, a refining, trading, storage, distribution and retail conglomerate dealing in crude oil, petroleum products and bio-fuels, headquartered in the UK. The objective is to measure, reduce and mitigate greenhouse gas (“GHG”) emissions across Zephyr’s businesses. Mitigation efforts will primarily be focused on the purchase of sustainability/decarbonisation offsets (called Verified Emission Reductions or “VER”) from reputable pre-vetted developers of sustainable projects.
The cost of purchasing the appropriate number of VERs to offset Zephyr’s growing operational footprint is expected to average well under $1 per barrel of oil equivalent, although the net cost to Zephyr may be considerably less given the potential to sell at a premium oil which has “net-zero” carbon status. Recent market-based evidence suggests that purchasers and supply chain partners are willing to absorb costs associated with the purchase of VER offsets related to oil and gas production.
Zephyr’s initial efforts will be focused on its Scope 1 GHG impacts, which cover all direct emissions from Zephyr of operated and non-operated sources – from the drilling and production of hydrocarbons through to transport to a refinery, as well as all other corporate emissions. This will include Zephyr’s current corporate activity i.e. its non-operated production assets in the Williston Basin, North Dakota, US, and its upcoming 25,000 acre appraisal project in the Paradox Basin, Utah, also in the US, where it will be the operator and for which the start date for production is September.
This initiative has full support from the Board, which also understands that mitigating the Company’s operational CO2 impact is only a first step – emissions from the ultimate end-use of produced volumes also have a significant CO2 impact. So Zephyr also pledges to work with potential end-users of its products to explore routes to more fully offset the CO2 emissions from the product it has sold (Scope 3 Emissions).
In addition to the environmental benefits that will result from Zephyr’s efforts to reach carbon-neutrality, the Company anticipates that its approach will also yield economic benefits – including expanded access to a wider group of potential institutional ESG investors. Furthermore, the average cost of capital for companies with committed ESG and decarbonisation initiatives has been shown to be demonstrably less than that of traditional resource companies.
The CEO of Zephyr, Colin Harrington, has commented:
“When the Company was re-launched, the new Board unanimously agreed to always operate with two core values in mind: to be responsible stewards of our investors’ capital and to be responsible stewards of the environment in which we work. These values are at the forefront of every decision we make. It’s why I’m excited that today’s pledge to offset 100 per cent of carbon emissions from our operations starting this September, is a ground-breaking initiative for Zephyr”.
“We are now a cash-generating oil producer with plans for further near-term development on our flagship appraisal project. This is why the timing is right to launch what we believe is an industry-leading environmental commitment. The path forward, albeit nascent and experimental, is grounded in the view that good environmental & operational performance + good governance = superior investor return.”