Note: To produce this article, dozens of oilfield services stakeholders were interviewed. Due to the highly competitive nature of the oilfield services market, all were interviewed under the condition of anonymity. As such, all names have been fictionalized to preserve that anonymity.
For a couple of years now, ESG (which stands for “Environmental, Social, and Governance”) has seemed like a pie-in-the-sky marketing exercise with which only the most publicly exposed companies have needed to engage.
The concept may be headed down to earth this year in oilfield services.
“ESG issues are a huge focus this year,” offered Logan, a chemicals VP. As oilfield service executives like him consider options for growing their market share in 2022, they are asking important questions related to sustainability, like:
What do my Tier 1 accounts expect?
What must I do to reduce my carbon footprint?
How should we talk about sustainability initiatives?
Do we have the numbers to back them up?
Environmental and safety issues aren’t new to the oilfield, but the continued rise of digital media and instant news feeds has elevated the scrutiny to new heights.
“One of our customers was recently publicly shamed into focusing on sustainability,” noted Tyson, a District Manager in the Gulf Coast region. This phenomenon - public shaming - may often be the driving factor that forces oilfield companies to reconcile their image to a particular sustainable standard, all while the industry as a whole receives increasingly negative press lambasting the “hydrocarbons brand.”
Beyond the political and PR aspects, ESG presents challenges for oilfield companies of all stripes. It’s an issue that affects operations, sales, marketing, and human resources, each to varying degrees.
To grow their market share, oilfield services companies must cater to the demands of publicly traded producers and pipeline companies who must maintain a squeaky clean ESG image to attract capital.
“Those Tier 1 operators want to see what ESG initiatives we've highlighted, “ Logan mentioned, “because whatever we can do on our end is a direct reflection on them as well.”
Larger oilfield services companies are now tracking things like carbon footprint, waste reductions, water consumption, and more. Beyond just tracking their own sustainability scorecards, they’re actively marketing the ways they can help their customers move the needle on ESG. The public entities have been publishing sustainability reports for years, one of many efforts that reflect the initiatives of their customers. Doing so allows them to attract and retain high-value business.
Water use, along with emissions, are high priority ESG issues for oil and gas companies. A single frac job, like this one, can use millions of gallons of water.
But ESG isn’t just an issue for oilfield services companies who operate in the limelight. It’s affecting the OFS industry as a whole, regardless of the size of customers they pursue.
Case in point: the labor force is moving away from companies who can’t craft a compelling sustainability narrative. According to a recent survey by recruitment firm Brunel and Oilandgasjobsearch.com, more than half of oilfield workers said they would be searching for opportunities in the renewables sector, an increase of almost 20 points since last year. The downturn of 2020 soured many potential employees to the industry after they were let go or furloughed. Younger prospects, for better or worse, tend to desire jobs at companies with a more positive public image.
Stuart, an oilfield services executive who focuses on water management, in particular, has noted the exodus of young professionals. “We have a lot of people who are moving on, for one reason or another,” he said, “and we don’t have that same number coming into the industry. There is definitely going to be a hole in terms of knowledge and experience.”
Fighting the negative perception that looms over the oil and gas industry will be an uphill battle for most. But the call for sustainable operations continues its crescendo, and companies are being forced to react.
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