Proactively addressing risks and opportunities
Devon is focused on producing reliable, affordable and accessible energy the world needs, while continuing to find ways to produce and deliver it more responsibly.
The world relies on oil and natural gas to power the basic systems of our daily lives – transportation, heating and cooling, lighting, manufacturing, agriculture, telecommunications and technology. Many of the products we use every day are made from plastics and compounds derived from oil and natural gas, which also fuel the machinery to manufacture these materials.
At Devon, we’re proud to find and produce these valuable commodities and improve our way of life. Through the work our employees do every day, we contribute to local, state, national and global economies. We also recognize that the economic benefits of our industry must be balanced with care for the environment. Devon is focused on delivering strong returns to our shareholders while continuously improving our environmental performance, with specific emphasis on climate change.
In its 2022 outlook, the U.S. Energy Information Administration (EIA) projects that oil and natural gas will continue to be leading sources of energy worldwide for decades to come. For example, in the transportation sector, gasoline and diesel fuel will account for 74% of total consumption in 2050. Devon will continue to produce the oil and gas the world needs in a safe, environmentally responsible and ethical way, and disclose our results publicly. Earning our stakeholders’ trust is important for the future of our business, so we’ll continue to plan for the risks and opportunities ahead.
Assessing and reporting our climate change-related risks
Climate change-related risks receive formal and ongoing consideration in Devon’s enterprise risk management process. The company regularly models numerous regional and macro-level scenarios – including acquisitions, divestitures and changes in regulations and market conditions – to test the strength of our portfolio and resources. Each year, the modeled scenarios inform the strategic decision-making of Devon’s executive committee and board of directors that factors into Devon’s long-range plan. We publicly reported on climate-related risks and the results of our climate-related scenario analysis in our third Climate Change Assessment Report (CCAR), published in 2021, demonstrating our ongoing commitment to transparency.
Our updated 2021 CCAR accounted for material changes to our portfolio since 2018, including the divestment of our Canadian and Barnett Shale assets, as well as closing the merger with WPX Energy. The 2021 report was prepared by Devon with support from third-party consultants and reviewed and approved by our board of directors. Devon retained ICF to help assess the company’s oil and natural gas portfolio’s resilience in the face of potential impacts of climate policy on oil, natural gas and natural gas liquids (NGL) demand, production and prices. During this assessment, Devon evaluated several possible future climate change scenarios to quantify the potential risks to the company’s portfolio and long-range business plan from a possible carbon-constrained future. Devon evaluated pricing scenarios and model results from both ICF and the widely referenced International Energy Agency (IEA), including the IEA’s 2020 Sustainable Development Scenario, which targets a rise in global temperatures to “well below 2°C” and “in which countries achieving net-zero emissions by 2050 spur the world as a whole to reach it by 2070.”
In addition, Devon retained Global Affairs Associates, a ClimeCo Company, to enhance the company’s alignment to the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD), an international, multi-industry led initiative launched to develop recommendations for voluntary disclosure of climate-related risk. We report in alignment with 2017 TCFD recommendations to meet our stakeholders’ expectations for reliable and meaningful disclosures.
The 2021 assessment determined that oil and natural gas will remain essential to meeting global energy demand, even in the carbon-constrained future scenarios. Additional conclusions included:
- Models indicate that Devon’s portfolio of assets is likely to be resilient, even in various low-carbon scenarios.
- The changes to our portfolio since 2018 – exiting Western Canada and the Barnett Shale and closing the merger with WPX Energy — have made the company more resilient in low oil and natural gas price scenarios.
- Devon’s disclosure practices for the governance, management and disclosure of climate-related risks and opportunities seek to align with TCFD recommendations, and include continually assessing new guidance as it becomes available.
Ambitious emissions reduction targets
Devon addresses climate change-related risks proactively in our environmental, operational and governance practices. Our strategy relies in part on energy efficiency and conservation, which we believe are also the most immediate and cost-effective ways to reduce emissions. We actively seek out technology solutions and innovative techniques to enhance our efforts.
To reduce methane emissions, we establish voluntary, company-specific targets that go beyond regulatory requirements. Among our actions to meet the targets are investing in technology, adopting new work practices and working creatively with stakeholders. To underscore our commitment, achieving our targets is a component of executive and employee compensation.
In 2019, we set a methane intensity target of 0.28% or lower by 2025, and then beat the target level in 2020. In June 2021, we reinforced our commitment to proactively manage climate-related risks and opportunities by establishing additional environmental performance targets to limit GHG and methane emissions in our operations. These operational emissions performance targets are in line with leading industry practices and stakeholder priorities. These targets, endorsed by our board, are the following:
- Achieve net zero GHG emissions for Scopes 1 and 2 by 2050
- Reduce Scopes 1 and 2 GHG emissions intensity by 50% by 2030 (from a 2019 baseline)
- Reduce methane emissions intensity by 65% by 2030 (from a 2019 baseline)
- Achieve flaring intensity of 0.5% or lower by 2025 and eliminate routine flaring by 2030
As we strive to meet or beat these targets, Devon will continue to apply a wide range of advanced technologies and best practices, in tandem with increasing efficiencies, and is committed to providing transparent updates on our progress.
Devon closely monitors possible business impacts of climate change in the market and policy arenas, and we’re prepared to adapt as needed. We’re committed to ongoing dialogue with our board of directors, shareholders and other stakeholders about our climate change-related risks and opportunities. Our industry will play a pivotal role in delivering global energy for generations to come, and Devon is embracing change to be part of that future.