IOGP position on capital requirements

This document provides IOGP's position on capital requirements. This paper was drafted in response to the revision of the Capital Requirements Regulation (CRR), part of the review of EU banking rules.

Context

The oil and gas industry supports a stable global financial system. Many banks have set ambitions to help achieve net-zero emissions by 2050 by aligning their lending and investment portfolios.

Many of our Members have published or will publish transition plans in line with EU disclosure requirements. These plans will be designed to ensure that the business model and strategy of the undertaking are compatible with the transition to a sustainable economy, and with the limiting of the temperature increase to 1.5°C above pre-industrial levels in line with the Paris Agreement, in compliance with the requirements of the Corporate Sustainable Reporting Directive (CSRD).

Consequently, the strategies and business models of oil and gas companies are evolving. Our industry is working towards long-term solutions, in particular, Carbon Capture Use and Storage (CCUS), renewable energies, and hydrogen solutions to help the EU achieve its climate neutrality target by 2050. Significant investments will be necessary to support decarbonization and transition activities while ensuring the security of energy supplies.

Key Recommendations

• Requirements imposed on existing or new oil and gas investments should not prevent secure and safe energy supply to Europe: a balanced approach between urgent short-term needs and long-term goals is needed
• Any policy intervention related to capital requirements should be founded on robust evidence, such as evidence derived from climate risk stress testing to determine the true prudential risk, in order to transition to a net zero economy while ensuring sustainable economic growth and competitiveness within the EU
• Increased capital requirements for oil and gas activities might affect the level playing field in the banking sector since EU banks, subject to more stringent rules, might lose access to profitable investment opportunities in the energy sector. Therefore, a careful and balanced approach should be taken to ensure a level playing field both within and outside the EU