Oil and gas companies still rewarding executives for expanding production, despite looming demand peak
“Low-carbon” business strategies conceal plans to expand gas
Crude Intentions II: How oil and gas execs are still incentivised to grow production despite peaking demand
Sign up today to download
the full report
As the energy transition continues to accelerate, demand for each of the fossil fuels is likely to peak before 2030. Oil and gas companies must plan for an economy with falling hydrocarbon use; for most, this means setting a strategy that includes planning for declining hydrocarbon output. To ensure that transition strategies are duly executed, executive remuneration must be framed accordingly.
Carbon Tracker has been analysing executive pay in oil and gas since 2019, and this note presents the latest update to the series. In this note, we delve into the executive compensation packages at 25 of the largest publicly-listed oil and gas companies, analysing the incentives guiding decision-making at the c-suite level.
Key Questions Addressed:
- Metrics Utilised: What metrics prevail in executive incentive plans?
- Production Growth Incentives: Which companies continue to incentivize oil and gas production growth?
- Transparency and Disclosure: How adequate is the disclosure of remuneration policies among these industry giants?
- Timeline Mismatch: How do the vesting periods of incentive plans compare with corporate strategic timelines?
- Recent changes: How have remuneration policies evolved in response to a recent period of elevated commodity prices?
Quotes
Carbon Tracker Associate Analyst and report author Saidrasul Ashrafkhanov said: “We’re increasingly likely to see peak demand for each of the fossil fuels by the end of the decade. For most oil and gas companies this means planning for their own output to decline over time, yet going by their remuneration policies, this generally doesn't seem to be in planning.”
Carbon Tracker Head of Oil, Gas and Mining Mike Coffin said: “The energy transition is accelerating, and oil and gas companies must plan for peaking demand for their product. Investors should be concerned executives are continued to be incentivised to grow production volumes, and develop new long-cycle assets, particularly if this is contrary to stated company strategy. Asset Owners and Asset Managers should use their votes accordingly to ensure that executives are acting in their best long-term interests.”