Corporate social responsibility in the oil and gas industry

Two interesting articles that appeared last week highlighted for me a project that ADI Analytics recently completed on benchmarking corporate social responsibility (CSR) in oil and gas companies.  The first was in the Economist and talked about how CSR is now more constructive and better ingrained with core business operations and goals.  The second is a long piece in the New York Times describing Shell’s efforts — not just within CSR but across a host of related corporate functions, including government relations — to begin drilling in the Arctic.

North American resources such as shale gas, unconventional oil, and the Arctic present to oil and gas companies a huge economic opportunity without the political and security risks that are often present in pursuing resources overseas.  However, the industry will have to assure communities, environmentalists, and other stakeholders of their commitment to responsible development.  Such efforts will need CSR and other functional capabilities that are best in class, driven by expertise and analytics, and both robust and flexible.

U.S. as a Natural Gas Exporter?

It’s a far cry from the situation five years ago when oil and gas majors were scrambling to build LNG import terminals in the U.S.  But a lot has changed in the past five years with the shale gas revolution.  So today companies are exploring terminals to export gas from the U.S.

Notwithstanding the promoters’ enthusiasm, it is hard to be optimistic of such ventures for three reasons.

First, although shale gas supply in the U.S. has increased dramatically and more could be produced at short notice if prices rise, natural gas continues to be dominated by three regional markets:  Americas, Europe and adjoining areas, and the Middle East.  Historically, there has been little exchange between these markets.

Second, structural changes in demand such as a global climate change accord are not on the horizon.  A global climate change accord could dramatically drive demand for natural gas, which is a lower-carbon fuel relative to coal and oil and could serve as a “bridge fuel” during the transition to a word dominantly supplied by renewables.

Third, demand growth in Asia, in particular China and India, are not sufficient to justify gas export models because shale gas supplies are not limited to the U.S.  Significant exploration is underway and discoveries are anticipated in the emerging economies too.