ifrs-s2-ibg-volume-13-oil-and-gas-refining-and-marketing-part-b

Title: Volume 13—Oil & Gas – Refining & Marketing

Category: Part B—Industry-based Guidance for IFRS S2

Source: IFRS Foundation (https://www.ifrs.org)

Navigator: https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/sustainability-pdf-collection/

Model: https://www.ifrs.org/content/ifrs/home/issued-standards/ifrs-sustainability-standards-navigator/sustainability-pdf-collection/jcr:content/root/responsivegrid_1242322373/standarddocument.model.json

PDF: https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-b/ifrs-s2-ibg-volume-13-oil-and-gas-refining-and-marketing-part-b.pdf?bypass=on

Year: 2023

Type: Industry

Industry-based Guidance on implementing

Climate-related Disclosures

Volume 13—Oil & Gas – Refining & Marketing

June 2023

IFRS S2

IFRS

® Sustainability Disclosure Standard

International Sustainability Standards Board

This Industry-based Guidance accompanies IFRS S2 Climate related Disclosures (published

June 2023; see separate booklet) and is issued by the International Sustainability

Standards Board (ISSB).

Disclaimer: To the extent permitted by applicable law, the ISSB and the IFRS Foundation

(Foundation) expressly disclaim all liability howsoever arising from this publication or

any translation thereof whether in contract, tort or otherwise to any person in respect of

any claims or losses of any nature including direct, indirect, incidental or consequential

loss, punitive damages, penalties or costs.

Information contained in this publication does not constitute advice and should not be

substituted for the services of an appropriately qualified professional.

Reproduction and use rights are strictly limited to personal non-commercial use, such as

corporate disclosure.

Any other use, such as – but not limited to – reporting software, investment analysis,

data services and product development is not permitted without written consent. Please

contact the Foundation for further details at sustainability_licensing@ifrs.org.

The Foundation has trade marks registered around the world (Marks) including ‘IAS®’,

‘IASB®’, the IASB® logo, ‘IFRIC®’, ‘IFRS®’, the IFRS® logo, ‘IFRS for SMEs®’, the IFRS for SMEs®

logo,

‘International

Accounting

Standards®’,

‘International

Financial

Reporting

Standards®’, the ‘Hexagon Device’, ‘NIIF®’, ‘SIC®’ and SASB®. Further details of the

Foundation’s Marks are available from the Foundation on request.

The Foundation is a not-for-profit corporation under the General Corporation Law of the

State of Delaware, USA and operates in England and Wales as an overseas company

(Company number: FC023235) with its principal office in the Columbus Building, 7

Westferry Circus, Canary Wharf, London, E14 4HD.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

Introduction

This volume is part of the Industry-based Guidance on Implementing IFRS S2 Climate-related

Disclosures. This guidance suggests possible ways to apply some of the disclosure requirements in

IFRS S2 but does not create additional requirements.

This volume suggests possible ways to identify, measure and disclose information about

climate-related risks and opportunities that are associated with particular business

models, economic activities and other common features that characterise participation in

this industry.

This industry-based guidance has been derived from Sustainability Accounting Standards

Board (SASB) Standards, which are maintained by the International Sustainability

Standards Board (ISSB). The metric codes used in SASB Standards have been included for

ease of reference. For additional context regarding the industry-based guidance contained

in this volume, including structure and terminology, application and illustrative

examples, refer to Section III of the Accompanying Guidance to IFRS S2.

IFRS S2 INDUSTRY-BASED GUIDANCE

Volume 13—Oil & Gas – Refining & Marketing

Industry Description

Oil & Gas - Refining & Marketing (R&M) entities refine petroleum products, market oil

and gas products, or operate gas stations, all of which comprise the downstream

operations of the oil and gas value chain. The types of refinery products and crude oil

inputs influence the complexity of the refining process used, with varied expenditure

needs and intensity of environmental and social impacts.

Note: The topics and metrics below are for ‘pure-play’ R&M activities or independent R&M

entities. Integrated oil & gas entities conduct upstream operations and also are involved

in the distribution, refining or marketing of products. Separate standards exist for the Oil

& Gas - Exploration & Production (EM-EP) and Midstream (EM-MD) industries. As such,

integrated entities also should consider the disclosure topics and metrics from those

industries.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Refining throughput of crude oil and other feedstocks 14 Quantitative Barrels of oil equivalent (BOE) EM-RM-000.A Refining operating capacity 15 Quantitative Million barrels per calendar day (MBPD) EM-RM-000.B Greenhouse Gas Emissions Topic Summary Oil and Gas R&M operations generate significant direct greenhouse gas (GHG) emissions from a variety of sources. Emissions primarily consist of carbon dioxide and methane from stationary fossil fuel combustion for energy supply. Energy costs are a significant share of refinery operating costs. GHGs also are released from process emissions, fugitive emissions resulting from leaks, emissions from venting and flaring, and from non-

routine events such as equipment maintenance. The energy intensity of production, and therefore the GHG emissions intensity, can vary significantly depending on the type of crude oil feedstock used and refined product specifications. Entities that cost-effectively reduce GHG emissions from their operations may capture operational efficiencies. Such reductions also may mitigate the effects of increased fuel costs from regulations that limit—or put a price on—GHG emissions.

Metrics EM-RM-110a.1. Gross global Scope 1 emissions, percentage covered under emissions-limiting regulations 1 The entity shall disclose its gross global Scope 1 greenhouse gas (GHG) emissions to the atmosphere of the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),

perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).

1.1

Emissions of all GHGs shall be consolidated and disclosed in metric tons of carbon dioxide equivalent (CO2-e) and calculated in accordance with published 100-year time horizon global warming potential (GWP) values.

To date, the preferred source for GWP values is the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (2014).

14 Note to EM-RM-000.A – The total volume of crude oil and other feedstocks processed in the refinery system during the reporting period.

15 Note to EM-RM-000.B– Operating (or operable) capacity is: the amount of capacity that, at the beginning of the period, is in operation; not in operation and not under active repair, but capable of being placed in operation within 30 days; or not in operation but under active repair that can be completed within 90 days. Operable capacity is the sum of the operating and idle capacity and is measured in barrels per calendar day.

IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

1.2

Gross emissions are GHGs emitted into the atmosphere before accounting for offsets, credits or other similar mechanisms that have reduced or compensated for emissions.

2 Scope 1 emissions are defined and shall be calculated according to the methodology contained in The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition, March 2004, published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

2.1

These emissions include direct emissions of GHGs from stationary or mobile sources; these sources include equipment at well sites, production facilities, refineries, chemical plants, terminals, fixed site drilling rigs,

office buildings, marine vessels transporting products, tank truck fleets,

mobile drilling rigs, and moveable equipment at drilling and production facilities.

2.2

Acceptable calculation methodologies include those that conform to the GHG Protocol as the base reference, but provide additional guidance, such as industry- or region-specific guidance. Examples include:

2.2.1

GHG Reporting Guidance for the Aerospace Industry published by the International Aerospace Environmental Group (IAEG)

2.2.2

Greenhouse Gas Inventory Guidance: Direct Emissions from Stationary Combustion Sources published by the U.S. Environmental Protection Agency (EPA)

2.2.3

India GHG Inventory Program

2.2.4

ISO 14064-1

2.2.5

Petroleum Industry Guidelines for reporting GHG emissions, 2nd edition,

2011, published by IPIECA

2.2.6

Protocol for the quantification of greenhouse gas emissions from waste management activities published by Entreprises pour l’Environnement (EpE)

2.3

GHG emission data shall be consolidated according to the approach with which the entity consolidates its financial reporting data, which is generally aligned with the ‘financial control’ approach defined by the GHG Protocol as well as:

2.3.1

The financial approach detailed in Chapter 3 of the IPIECA/API/OGP Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions, 2nd Edition, 2011 (hereafter, the ‘IPIECA GHG Guidelines’)

2.3.2

The approach provided by the Climate Disclosure Standards Board (CDSB) that is described in REQ-07, ‘Organisational boundary,’ of the CDSB Framework for reporting environmental and social information IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5

3 The entity shall disclose the percentage of its gross global Scope 1 GHG emissions covered under an emissions-limiting regulation or programme intended to limit or reduce emissions directly, such as cap-and-trade schemes, carbon tax/fee systems, and other emissions control (for example, command-and-control approach) and permit-based mechanisms.

3.1

Examples of emissions-limiting regulations include:

3.1.1

California Cap-and-Trade (California Global Warming Solutions Act)

3.1.2

European Union Emissions Trading Scheme (EU ETS)

3.1.3

Quebec Cap-and-Trade (Quebec Environment Quality Act)

3.2

The percentage shall be calculated as the total amount of gross global Scope 1 GHG emissions (CO2-e) covered under emissions-limiting regulations divided by the total amount of gross global Scope 1 GHG emissions (CO2-e).

3.2.1

For emissions subject to more than one emissions-limiting regulation, the entity shall not account for those emissions more than once.

3.3

The scope of emissions-limiting regulations excludes emissions covered under voluntary emissions-limiting regulations (for example, voluntary trading systems), as well as reporting-based regulations.

4 The entity may discuss any change in its emissions from the previous reporting period, including whether the change was because of emissions reductions,

divestment, acquisition, mergers, changes in output or changes in calculation methodology.

5 In the case that current reporting of GHG emissions to the CDP or other entity (for example, a national regulatory disclosure programme) differs in terms of the scope and consolidation approach used, the entity may disclose those emissions.

However, primary disclosure shall be according to the guidelines described above.

6 The entity may discuss the calculation methodology for its emissions disclosure,

such as if data are from continuous emissions monitoring systems (CEMS),

engineering calculations or mass balance calculations.

EM-RM-110a.2. Discussion of long- and short-term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets 1 The entity shall discuss its long- and short-term strategy or plan to manage its Scope 1 greenhouse gas (GHG) emissions.

1.1

Scope 1 emissions are defined and shall be calculated according to the methodology contained in The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition, March 2004,

published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation

1.2

The scope of GHG emissions includes the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),

hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).

2 The entity shall discuss its emission reduction target(s) and analyse its performance against the target(s), including, if relevant:

2.1

The scope of the emission reduction target (for example, the percentage of total emissions to which the target is applicable);

2.2

Whether the target is absolute or intensity-based, and the metric denominator if it is an intensity-based target;

2.3

The percentage reduction against the base year, with the base year representing the first year against which emissions are evaluated towards the achievement of the target;

2.4

The time lines for the reduction activity, including the start year, the target year and the base year;

2.5

The mechanism(s) for achieving the target; and

2.6

Any circumstances in which the target or base year emissions have been,

or may be, recalculated retrospectively or the target or base year has been reset, which may include energy efficiency efforts, energy source diversification, carbon capture and storage, or the implementation of leak detection and repair processes.

3 The entity shall discuss activities and investments required to achieve the plans or targets, and any risks or limiting factors that might affect achievement of the plans or targets.

4 The entity shall discuss the scope of its strategies, plans or reduction targets, such as whether they pertain differently to different business units, geographies or emissions sources.

4.1

Categories of emissions sources may include:

4.1.1

Flared hydrocarbons, including all emissions emitted from flares and which are associated with the management and disposal of unrecoverable natural gas via combustion of hydrocarbon products from routine operations, upsets, or emergencies

4.1.2

Other combusted emissions, including, but not limited to:

(1) emissions from stationary devices, including, but not limited to boilers, heaters, furnaces, reciprocating internal combustion engines and turbines, incinerators, and thermal/catalytic oxidisers,

(2) emissions from mobile sources, including, but not limited to barges, ships, railcars, and trucks for material transport; planes/

helicopters and other entity vehicles for staff transport; forklifts,

all terrain vehicles, construction equipment, and other off-road mobile equipment, and (3) other combusted emissions shall exclude those emissions disclosed as flared hydrocarbons IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 7

4.1.3

Process emissions, including, but not limited to those emissions that are not combusted and are intentional or designed into the process or technology to occur during normal operations and are a result of some form of chemical transformation or processing step.

Such emissions include, but are not limited to those from hydrogen plants, amine units, glycol dehydrators, fluid catalytic cracking unit and reformer generation, and flexi-coker coke burn

4.1.4

Vented emissions, including those emissions that are not combusted and are intentional or designed into the process or technology to occur during normal operations, and which include,

but are not limited to: (1) venting from crude oil, condensate, or natural gas product storage tanks, gas-driven pneumatic devices,

gas samplers, chemical injection pumps, exploratory drilling,

loading/ballasting/transit, and loading racks, (2) venting resulting from maintenance/turn-arounds, including, but not limited to decoking of furnace tubes, well unloading, vessel and gas compressor depressurising, compressor starts, gas sampling, and pipeline blowdowns, and (3) venting from non-routine activities,

including but not limited to pressure relief valves, pressure control valves, fuel supply unloading valves, and emergency shut-down devices

4.1.5

Fugitive emissions, including those emissions which can be individually found and ‘fixed’ to make emissions ‘near zero’ and which include, but are not limited to emissions from valves,

flanges, connectors, pumps, compressor seal leaks, Cata-Dyne®

heaters, and wastewater treatment and surface impoundments 5 The entity shall discuss whether its strategies, plans, or reduction targets are related to, or associated with, emissions limiting or emissions reporting-based programmes or regulations (for example, the EU Emissions Trading Scheme,

Quebec Cap-and-Trade System, California Cap-and-Trade Program), including regional, national, international or sectoral programmes.

6 Disclosure of strategies, plans or reduction targets shall be limited to activities that were ongoing (active) or reached completion during the reporting period.

Water Management Topic Summary Refineries can use large quantities of water depending on their size and refining process complexity. This water use exposes them to the risk of water scarcity, depending on their location, and related costs. Extraction of water from water-stressed regions or water contamination also may create tensions with local communities. Refinery operations require wastewater treatment and disposal, often via on-site wastewater treatment plants before discharge. Reducing water use and contamination through recycling and other water management strategies may permit entities to capture operational efficiencies and reduce operating costs. They also could minimise regulatory, water supply shortages and community-related disruptions on operations.

Metrics EM-RM-140a.1. (1) Total water withdrawn, (2) total water consumed; percentage of each in regions with High or Extremely High Baseline Water Stress 1 The entity shall disclose the amount of water, in thousands of cubic metres,

withdrawn from all sources.

1.1

Water sources include surface water (including water from wetlands,

rivers, lakes and oceans), groundwater, rainwater collected directly and stored by the entity, and water and wastewater obtained from municipal water supplies, water utilities or other entities.

2 The entity may disclose portions of its supply by source if, for example, significant portions of withdrawals are from non-freshwater sources.

2.1

Fresh water may be defined according to the local laws and regulations where the entity operates. If no legal definition exists, fresh water shall be considered to be water that has less than 1,000 parts per million of dissolved solids.

2.2

Water obtained from a water utility in compliance with jurisdictional drinking water regulations can be assumed to meet the definition of fresh water.

3 The entity shall disclose the amount of water, in thousands of cubic metres,

consumed in its operations.

3.1

Water consumption is defined as:

3.1.1

Water that evaporates during withdrawal, use and discharge

3.1.2

Water that is directly or indirectly incorporated into the entity’s product or service

3.1.3

Water that does not otherwise return to the same catchment area from which it was withdrawn, such as water returned to another catchment area or the sea 4 The entity shall analyse all its operations for water risks and identify activities that withdraw and consume water in locations with High (40–80%) or Extremely High (>80%) Baseline Water Stress as classified by the World Resources Institute’s (WRI) Water Risk Atlas tool, Aqueduct.

5 The entity shall disclose water withdrawn in locations with High or Extremely High Baseline Water Stress as a percentage of the total water withdrawn.

6 The entity shall disclose water consumed in locations with High or Extremely High Baseline Water Stress as a percentage of the total water consumed.

Product Specifications & Clean Fuel Blends Topic Summary Some regulatory jurisdictions have implemented product specifications and renewable fuel blends, which pose significant compliance and operational risks for Refining &

Marketing entities. Entities may face long-term reductions in revenue from fossil fuel-

based products and services because of GHG mitigation policies such as renewable fuel mandates or standards, as well as competition from non-fossil fuel products. To ensure regulatory compliance and position themselves for long-term competitiveness, some entities are investing in clean fuel production or purchasing ethanol and other renewable biofuels. Advanced biofuels and fuel technologies have lower lifecycle impacts than traditional biofuels, and they can be used to minimise future regulatory risks and public pressure. Although short-term costs to find commercially viable technologies can be significant, investments in R&D for such technologies could serve to support R&M entities’ long-term profitability.

Metrics EM-RM-410a.2. Total addressable market and share of market for advanced biofuels and associated infrastructure 1 The entity shall provide an estimation of the total addressable market for advanced biofuels and associated infrastructure.

1.1

Total addressable market is defined as potential revenue should the entity capture 100% of the market share of the product category (for example,

the global market for advanced biofuels and advanced biofuel infrastructure).

2 The entity shall disclose the share of the total addressable market for advanced biofuels or associated infrastructure it currently captures with its products.

2.1

Market share shall be calculated as revenue from these products divided by the size of the total addressable market.

3 Advanced biofuels are defined as biofuels other than ethanol derived from corn starch (kernels) and having 50% lower lifecycle greenhouse gas emissions relative to gasoline.

4 Revenue from advanced biofuel infrastructure includes that from the entity’s retail operations (fuel stations), joint ventures with primary producers, or technologies that enable the production of advanced biofuels.

5 If a significant difference exists between the total addressable market and the market the entity can serve through its existing or planned capabilities, sales channels or products (the serviceable available market), then the entity may disclose this information.

6 The entity may provide a projection of growth of this market, where the projected addressable market is represented—based on a reasonable set of assumptions about changes in market conditions— as a percentage of year-on-year growth or as an estimate of the market size after a defined period (the market size in 10 years).

6.1

The entity may disclose its target three-year market share as a measurement of targeted growth, where the target is the percentage of the total addressable market that the entity plans to address over a three-year time horizon.

7 The entity may discuss other non-revenue generating initiatives it has undertaken to commercialise biofuels, such as partnerships (for example, pilot projects,

research and development projects) with fleet operators (air, ground or marine transportation), airlines, vehicle manufacturers and governmental agencies.

EM-RM-410a.3. Volumes of renewable fuels for fuel blending: (1) net amount produced, (2) net amount purchased 1 The entity shall disclose the net volumes in barrels of oil equivalent of renewable fuels produced, including biofuel, cellulosic biofuel, ethanol, advanced biofuels,

and other renewable fuels for use in fuel blending.

2 The entity shall disclose the net amounts of renewable fuels purchased.

3 Net amounts are defined as volumes produced or purchased for use in fuel blending, less amounts sold to independent third parties in arms-length transactions during the reporting period, either directly or indirectly.

4 Some jurisdictions permit volume ‘double-counting’ based on types of advanced renewable fuels used or alternative methods of production. For the purposes of this disclosure, an entity shall not double-count renewable fuel volumes.

5 The entity shall disclose the conversion factors and assumptions used to convert renewable fuel volumes to barrels of oil equivalent (BOE).

6 The entity may include an analysis of its biofuel production capacity and total renewable fuel production of: (1) renewable fuel, (2) advanced biofuel, (3) biomass-

based diesel and (4) cellulosic biofuel in barrels of oil equivalent (BOE).

12© IFRS Foundation Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD, UK Tel+44 (0) 20 7246 6410 Email sustainability_licensing@ifrs.org ifrs.org International Financial Reporting Standards®, IFRS Foundation®,

IFRS®, IAS®, IFRIC®, SIC®, IASB®, ISSBTM, IFRS for SMEs®