AN INTERVIEW WITH DAVID THOMAS, CHEIRON CHIEF EXECUTIVE OFFICER

How has Cheiron’s approach to decarbonization evolved over the years and what steps have been taken to reduce greenhouse gas emissions?

Cheiron views Sustainability as one of the key pillars of its; supplying energy to meet Egypt’s social and economic needs whilst also protecting our workforce, the environment, and the communities on which we depend. We recognize that our emissions, energy use, and materials consumption are  contributing factors to climate change and support the transition to a low carbon economy in line with Egypt’s national policies. We also recognize that oil and gas will have a vital role to play in Egypt’s economy for a long time to come.

The company has been progressively implementing Good International Industry Practice as part of its broader sustainability agenda, with reductions in our greenhouse gas (“GHG”) emissions being a core objective. Last year we published our Sustainability Plan which formalises many of these activities and sets short, medium and long-term GHG related objectives and actions across the business. Like many companies, we continue to identify our role in the Energy Transition and are in the process of finalizing our Energy Transition Plan to support our broader Sustainability objectives. This not only looks at emissions from our operations, supply chain, and products but also key interactions with other sustainability issues including biodiversity protection, waste management, and community engagement.

What are Cheiron’s decarbonization ambitions for the coming period? Can you provide insight into the timeline and milestones that Cheiron has established for its decarbonization goals, and how progress is being monitored?

Cheiron’s short term target is to reduce GHG emissions per unit of production across all our Egyptian operations by 25% by the end of 2025 against a 2020 baseline. We support eliminating routine venting and flaring as soon as practical and no later than 2030 in line with the World Bank Zero Flare Initiative and also recognize the need to control methane emissions in the near term. This includes reducing fugitive emissions as part of Egypt’s Global Methane Pledge and in line with the Oil and Gas Methane Partnership. Cheiron also has the ambition to be a Net Zero energy company by 2050.

Both our Sustainability Plan and draft Energy Transition Plan support these elements with benchmarks established for intervening periods. We support a decarbonization pathway using a common but differentiated convergence approach between developing countries, such as Egypt, and those with more mature economies. Cheiron is also aligning its actions with the United Nations Conventions on both biodiversity and climate change and this requires close collaboration with the Ministry of Petroleum, EGPC, and other Government agencies as well as our sister companies. A great strength in the Egyptian oil and gas sector is the way in which companies can work together under the auspices of the Ministry to achieve a common goal.

What specific technologies or strategies is Cheiron considering or implementing to achieve its decarbonization goals?

We have initiatives running that seek to minimize emissions and move towards Net Zero for emissions either directly associated with operations (called Scope 1 and 2 releases) as well as those associated with the supply and product chain (called Scope 3).

To reduce emissions associated with our own operations Cheiron continues to substitute diesel fuel with gas. Individual well generators are being replaced across the portfolio with centralised gas-fired power and electrification units. Gas that would otherwise be flared is also being recovered for power generation. Projects to continue electrification of systems to deliver further energy efficiency gains are in various stages of both implementation and design. Such systems are already being introduced into new project designs along with pressure control systems that prevent the need for flaring or venting.

All our companies continue to conduct detailed GHG emission reduction and energy efficiency opportunity assessments to optimise our existing operations. This is also being carried out in conjunction with an expansion of the number of companies certified to ISO 50001 (for Energy Management).

We also continue to undertake studies of how we can use renewables, biofuel and potentially hydrogen as fuels for our operations in future. We are tendering for units to convert camp food waste to generate biogas for power in remote locations and generate a soil conditioner that local communities can utilise. We have also recently completed a major Carbon Capture and Storage feasibility study for our Bapetco facilities in conjunction that will progress to the next design stage. A design study to introduce a large-scale waste heat recovery project for waste heat generated by open cycle power turbines has also been conducted and this should move towards project implementation shortly.

How has enhancing energy efficiency played an important role in cutting down on emissions at your assets?

Energy losses are a cost to the business as well as a potential source of GHG emissions, so enhanced energy efficiency saves the business money and helps the environment. It allows us to prolong the economic lives of our oil and gas fields by reducing late field life costs and, for new fields, maximizing the use of existing infrastructure can yield significant benefits. It is also important to look outside the boundaries of our operations to see how best to share the use of available infrastructure across the sector by arrangement with neighboring operators. Viewing greenhouse gas emissions through the lens of energy loss prevention also has benefits in focusing our organization and staff on the challenges ahead.

How does Cheiron measure, track, and report progress towards its decarbonization targets?

We track the emissions generated directly from our operations and report these, along with our emissions intensity, on a monthly basis to monitor progress against our reduction target. Detailed information on environmental plans and initiatives, as well as performance data, are also included in our Annual Sustainability reporting. In the future we will be introducing a net carbon intensity indicator for our products that identifies how much carbon is emitted per unit of energy within our products. This indicator will reduce as we move to a greater proportion of gas within our product mix and subsequent diversification of energy streams into low-carbon fuels and renewable power.

How does Cheiron plan to balance its existing oil and gas operations with transitioning to a lower carbon future?

To reduce the carbon intensity of products our aim is to substantially increase the proportion of gas in our total production volumes. Gas is required to displace higher carbon fuels and support emission reduction efforts in other sectors including electricity generation, fuel for transportation and homes, as well as emission reduction efforts abroad where gas is exported. This is to provide secure, affordable as well as low-carbon energy whilst also providing decent work opportunities and reducing social inequalities within a developing economy such as Egypt’s.

Cheiron is also part of the diversified PICO group of Companies. Future opportunities exist for the group to take solutions beyond current oil and gas operations to diversify into low-carbon products. This includes services supporting hydrogen fuel and renewable power adoption as well as working with PICO’s agricultural business to develop nature-based solutions and regenerative farming practices that absorb carbon dioxide to generate useful products, including biofuels, and potentially provide carbon offsets.

How does Cheiron engage with stakeholders, including the Egyptian Ministry of Petroleum and Mineral Resources and local communities, to ensure a smooth transition towards decarbonization?

All our operational activities supporting the energy transition are delivered through our Joint Operated Companies (“JOCs”) which are jointly owned by Cheiron, our Partners, and the Egyptian Government through the Egyptian General Petroleum Corporation (“EGPC”). This structure ensures that we stay fully aligned with the Egyptian Government policies and guidelines and allows us to benefit from collaboration with EGPC and the Ministry and other third-party operators who may use our infrastructure to process their oil and gas. Reaching alignment on the best GHG emission-reducing strategies with these various stakeholders is key to reducing GHG emissions even further.

We also continue to work with our local communities to highlight the importance of environmental stewardship, particularly in the Gulf of Suez area which is a particularly sensitive environment. When we look ahead we can see opportunities to reduce carbon emissions through natural solutions using nature to capture carbon at the same time as protecting and enhancing biodiversity. Such opportunities can also secure livelihoods and working closely with local communities is vital.

Can you provide examples of successful collaborations or partnerships that Cheiron has established to advance decarbonization objectives and build capacity in the oil and gas sector

In Bapetco, one of Cheiron’s JOCs, we have developed a short, medium and long-term road map of GHG reduction initiatives in conjunction with our Partners and EGPC colleagues. The road map includes a step by step action plan of measures we can implement now (such as flare gas reduction and centralised power generation using gas), measures that require engineering study (such as waste heat recovery and the use of renewable energy sources) and areas we need to develop research and development collaborations (including Carbon Capture and Storage). Bapetco translates this vision into annual action plans which are approved and supported with funding by the Shareholders. Similar types of plans and arrangements are in place for all our JOCs, tailored to their specific operating environments.

Where possible, we also encourage the use of innovative technologies and a good example of this are current studies, run in collaboration with Partners and Bapetco, to evaluate the possible use of thermal plasma electrolysis to convert flare gas to hydrogen and saleable carbon.

Do you think Egypt is taking the right steps to achieve the goals of The Paris Agreement? Why?

Whilst Egypt has yet to define a Net Zero target date, it is certainly taking the right steps to reduce emissions. At a national level, the country is committing to reduce flaring to less than 50% of 2015 levels, and overall methane emissions by 30% below 2020 levels, across all sectors by 2030. Targets for renewable energy within the electricity supply mix are also defined as part of the country’s Long-Term Low Emission Development and Climate Change Strategy.

The focus is on demand side emission management and adaptation, and this is understandable for a rapidly developing country like Egypt where further infrastructure improvements and economic growth are required to support a just and equitable transition.

The country is also open to support from the global community for access to technology and international finance mechanisms such as carbon credits which can support GHG reductions for developing and developed countries alike.

What are the main challenges and obstacles that Cheiron is facing in its journey towards decarbonization, and how are they being addressed?

At present, there are also no formal carbon pricing mechanisms in Egypt to ensure the social and environmental costs are fully incorporated into investment decision making. A carbon price, whether through formal mechanisms such as carbon tax or tradeable permits, or a mandatory inclusion as a cost sensitivity within economic assessments would highlight the true cost of emissions. We consider this would change how potential emissions reductions are perceived and prioritized.

Also, whilst emissions reduction targets have been identified for the oil and gas sector, there is still work to do to determine how these targets are allocated and how reduction initiatives can be supported through the production sharing agreement processes. The role international carbon credits can play within such agreements where credits can support project financing and generate income for international investors and the Government also merits future discussion.