Risks associated with climate change and environmental impact have been identified, with potential impacts quantified for each Business Unit, using our Enterprise Risk Management process. We report on those publicly through our annual CDP submission. This process is used to assess implications, identify mitigating measures and build a portfolio of business opportunities.
Vermilion's BU and asset risks are aggregated into the Corporate Risk Register. Risk is assessed through a grid matrix based on the anticipated impact severity and subsequent probability of an event occurring in consideration of the impact to people, the environment, financial results and social license to operate. Stakeholders considered in risk assessment include, but are not limited to, internal (Executive, Board of Directors, employees, contract staff), and external parties (landowners, NGOs, investors, the general public, regulators, governments, industry groups).
Risks and opportunities are prioritized based on impact to the environment as well as monetary implications of identified climate change risks and potential project opportunities. Based on this information as well as business need, projects are prioritized in a manner that allows Vermilion to support healthy communities as well as augment our strong shareholder value.
Depending upon the business unit, risks cover such areas as regulatory changes, carbon pricing and taxes, community support, rising sea levels, increased severity of tropical storms, temperature increases, and potential for increased natural disasters.
Vermilion has undertaken a GHG Quantification Methodologies study and completed a global Carbon Liability Analysis for all Business Units (BU); this project is annually reviewed by Vermilion staff, and is undergoing a completely new analysis in 2017. The Carbon Liability Analysis factors in a number of potential regulatory, price point and taxation changes that are possible over the next several years. These documents detail the current emission generating activities (Scope 1, 2, 3) and details the liability and risk associated with the carbon footprint of operations in each BU. The types of emissions considered in this quantification survey include NOx, SOx, VOC, H2S, PM, BTEX, CO2, CH4, N2O, PFC, HFC, and SF6. Vermilion completes fugitive emission assessments annually at select locations in Canada, France and The Netherlands.
Scenario planning: At a minimum, on an annual basis, and more frequently when required (such as daily during cyclone season), Vermilion examines and reassesses the risk associated with climate change and the potential effects on operations globally. This review considers the potential impact of a 2oC scenario, with these impacts included in our risk assessment process, including:
The results annually feed back into our risk/opportunity management process to ensure Vermilion has a sound data foundation to support responsible decisions in our operating areas. Detailed analysis of these risks, including potential impact, financial implications, management methods and cost of management, can be found in our annual CDP submission. Vermilion also proactively conducts operational and engineering reviews aimed at increasing efficiency, reducing emissions and monetary expenditure requirements at major facilities, which has resulted in the identification of a large number of opportunities.
Carbon pricing: The primary challenge associated with carbon pricing encountered is the rapidly changing geopolitical landscape, which has a direct impact on regulation and taxation schemes. As these have the potential for rapid change to the price of carbon, Vermilion assesses the price of carbon on both a realized cost perspective as well as shadow pricing, and has identified likely carbon pricing scenarios for all of our operations. This work pertains to Scope 1 and 2, and is applicable to Scope 3 emissions, as these emissions have the potential to be impacted by an economy-wide carbon tax, such as the tax in Alberta.
The determination of carbon pricing currently resides with our Corporate HSE group. The process for determining pricing includes a review of current pricing assertions by governments and a review of published research relating to the Paris Agreements and potential carbon price requirements.