Key Takeaways | Operating and Insuring Oil & Gas Matters in Today’s Environment

During this webinar, Partners Jack Langlois, Parker Lee and Jibin Luke, along with special guests Will Hixon, property and casualty practice leader at USI Insurance Services, and Jordan Volino, corporate counsel at 89 Energy, discussed how day-to-day operations in the oil and gas industry have changed over the past few years and how insurance companies are reacting to said changes.

Key takeaways included:

1. Within the oil and gas industry, the growing emphasis on environmental, social and governance (ESG) factors is prompting improvements in drilling methods, efficiency and extraction yield. While advanced technologies are gaining traction, smaller firms may face the risk of overspending on ESG initiatives.
2. Insurance companies are ostensibly applying pressure on oil and gas firms to mitigate their environmental impact. However, the language surrounding these efforts remains vague, offering a wide latitude to oil and gas firms in implementing environmental measures. Overall, the momentum has shifted away from tighter environmental criteria, with many founding members of the Net-Zero Insurance Alliance having left the group in May 2023.
3. There is a push within the oil and gas industry to reduce methane emissions and flaring, with new drilling technologies aiding this endeavor. However, managing emissions from older wells poses a challenge despite companies implementing monitoring processes. Oil and gas companies are pushing risks onto service providers, who in turn are under pressure to use new technologies.
4. Funds with portfolio companies are contemplating uniform environmental compliance across entities beyond state requirements because it aids fundraising. There has been a recent shift in investor queries, with more focus on the type of technology used, mitigation techniques and ESG promotion.
5. The insurance sector lags financial institutions in focusing on and developing metrics related to environmental regulations. Future expectations include more rigorous criteria for sustainability and environmental stewardship, though the narrative has shifted from hardline ESG and zero carbon policies to enabling the energy transition.