Trust Challenges To demonstrate that it can maintain the value creation proposition for investors in the face of growing uncertainties, th...
Trust Challenges To demonstrate that it can maintain the value creation proposition for investors in the face of growing uncertainties, the oil and gas industry will need to embrace strategies that can create value in any scenario, including shortening project cycle times, minimizing product losses (including methane leakage), and increasing recycling and reuse of inputs such as water, heat and steel. Such strategies align industry more closely with technical solutions that will be attractive to society as a whole. But fundamentally, in order for the oil and gas industry to be seen as a partner in energy solutions and economic prosperity – rather than a source of environmental damage and driver of sectarian conflict – the industry will need to address the serious trust challenges created by the failures of its worst ranks. A 2013 Gallop poll, for example, ranked the oil and gas industry as the least trusted industry, tied for last place with the tobacco industry,
despite the pivotal importance of energy in daily life. This loss of trust has been amplified by the industry’s linkages to controversial lobbying and law suits against climate change policies and other environmental and safety regulations. The industry tends to see the solution as better communication of technical issues. However, the public is seeking both measurable improvement in performance and greater transparency and disclosure. The more challenging environment for oil and gas investment increases the stakes for addressing aboveground risks that prevent or delay resource development. Even with more stringent climate policies, oil will remain the dominant fuel for transport for the next two to three decades. And yet, oil and gas industries often meet sharp resistance around the world in many communities that have experienced negative environmental, social and geopolitical consequences from oil and gas exploration and development. Oil and gas companies have set expectations among their stakeholders that they can operate without negative environmental impacts, but, in many cases, actual performance has fallen short of these expectations.
Many operators work to high standards and go beyond reasonable efforts to clean up spills and restore the environment to its previous condition. However, highly visible lapses in environmental performance have undermined the confidence of an influential segment of society of the willingness of oil and gas companies to 5 deliver fuel without undue costs on society that exceed the social benefits received. The oil and gas industry is also plagued by incidents and accusations of corrupt practices. The idea of a corrupt oil and gas industry is deeply ingrained in public perceptions in many parts of the world and remains in the news with major events like the Petrobras and Nigerian government scandals. This lack of public trust in the industry complicates project development and jeopardizes government approval for major infrastructure projects. However, corruption matters beyond public trust. It is an enormously costly problem that creates operational and supply chain inefficiencies, can result in huge fines and compliance costs in the aftermath of a scandal, and has a negative impact on the distribution of wealth in certain societies, linking economic damage and political instability to the oil industry itself. Mistrust, strained relations and conflicts with local communities remain a problem in many locations. A private Goldman Sachs study indicated that nearly half of the risks facing projects were non-technical, with stakeholder-related risks being the single biggest issue.
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