Climate Change and Energy Transition

Responding to the energy challenges

The energy paradigm in the world is changing and Galp aims to play an active role in this transformation, namely by:

Adapting our portfolio to future needs, whenever possible and in synergy with the current business;
Diversification of our assets, with a consequent mitigation of risks resulting from its carbon intensity reduction;
Developing innovative and differentiating solutions that promote the transition into a low-carbon economy.

By 2025, about 50% of our investments are aimed at capturing opportunities from the energy transition, of which 35% will be allocated to renewable power generation and new businesses.

Scenario Analysis

In order to ensure that we are prepared for a wide range of possible futures, namely their impact on the energy value chain in different geographies, Galp included in its strategic planning a process of critical reflection on the future.

With this goal in mind and aware of the need to ensure that Galp is part of the solution to today’s and tomorrow’s challenges, we have developed two alternative and contrasting scenarios that will test the resilience of our strategy.

These scenarios are based on the premise that technological development is and will continue to advance and contribute positively to less carbon intensive energy solutions but differ in the degree of global alignment with emission reduction commitments and their impact on global trade agreements. This variable should play a key role in unlocking and making available future technologies that could accelerate decarbonisation.

Total primary energy demand mix in 2040 and 2050 by scenario (bn toe)

Galp seeks to create a strategy that tackles the current and future context of energy and mobility, ensuring Galp’s resilience and agility in an increasingly complex, fast, and ever-changing world.

We are focused on the development of sustainable businesses that generate value, as an integrated energy Company, through a diversified portfolio of energy generation, ranging from oil and natural gas production to renewable energies, with an industrial background geared towards the new market needs, through the adaptation, efficiency and continuous transformation of its processes, and with more innovative commercial solutions that promote the energy transition of our customers and consumers.

For more information about the scenarios used by Galp, please see chapter 2.1 of our Integrated Report.

Climate change risks

Galp has been working on the categorisation of physical and transition climate risks in its activities. This analysis aims to assess the resiliency of our strategy to different scenarios, as well as identify the most relevant associated risks and opportunities.

Galp integrated the TCFD recommendations in the identification of these climate change related risks. Chronic and acute physical variables (such as the increase in average temperature, number of extremely hot and cold days, average wind, average rainfall, sea level rise, frequencies of extreme events such as rainfall, wind and probability of wildfire) as well as market variables (such oil prices, CO₂ prices, electricity prices, refining margins and oil & gas demand) were collected in order to estimate the impact of climate change risks in Galp’s operations and value at risk.

As part of the mitigation and adaptation plan with measures to avoid or reduce the associated risks and foster opportunities, Galp has presented a refreshed strategy to reshape its Portfolio, refresh Relations and reenergise People. Galp is going to scale-up the renewables business, expand the position in the electricity value chain and develop new energies to accelerate the decarbonisation path, with the ambition to become net carbon neutral by 2050.

For more information on Galp refreshed strategy, please see our Strategy.

We manage risk as an opportunity

Energy transition and climate change risks and opportunities are integrated and evaluated by the Company through an holistic risk management approach. In this context, we identify financial and non-financial risks and opportunities, we seek methodologies and metrics to assess and incorporate them into the business and strategy, and we establish initiatives, action plans and targets to mitigate risks and exploit opportunities.

The climate and energy transition related risks and opportunities integrate the Company's strategic formulation processes and are overseen by the Board of Directors (BoD) and the Executive Committee (EC), with their members participating actively in specialized committees in these areas such as, the Sustainability Committee, Risk Management Committee, among others.

Galp monitors and analyzes the main transition risks, namely the competition, legal and compliance, and market risks, as well as the physical risks caused by disruptive events resulting from climate change.

Aware of the challenges inherent in a transition to a low carbon economy, Galp has made a strategic commitment to gradually diversify the portfolio by integrating energy solutions that lead to lower carbon emissions and new business models. As an integrated energy player our current market presence puts us in a strong position to integrate current products with new services and business models during the decarbonization of the economy.

Carbon management throughout our value chain

Galp integrates climate and sustainability issues, through mechanisms and requirements that are considered in the decision-making processes connected to the various project development stages, throughout their life cycle.

In assessing new opportunities In assessing new opportunities, Galp incorporates carbon into its investment analysis. We consider a carbon price ($50/tonCO2e) in all investment decision-making processes, which together with a due diligence analysis of the activity’s carbon intensity ensures the sustainability and resilience of our portfolio.

In the development phase In the development phase, we delineate our projects according to the O&G industry best available practices, by working on the adoption of more efficient and sustainable technological solutions, with direct impact on the reduction of the carbon intensity of the activities. This approach has allowed us to achieve an activity carbon intensity of 9.4 kgCO2e/boe, considering operated and non-operated assets (WI), better than the benchmarks used by IOGP.

Through continuous monitoring The carbon intensity of our businesses is continuously monitored, see in more detail Galp’s Carbon footprint and carbon intensity metric. Our objective is to continuously reduce the carbon intensity of our activities.

We actively and transparently participate in global initiatives on climate change

Task Force on Climate-related Financial Disclosures

We take on the importance of a responsible leadership that integrates climate challenges into its strategy. Galp's support to the Task Force on Climate-related Financial Disclosures reflects a commitment to promoting a more balanced relationship between meeting energy needs and minimising our operations’ carbon intensity, as well as to a transparent reporting of climate-related information.

Learn more about this initiative and see here our alignment with the TCFD requirements.

Zero Routine Flaring by 2030 of the World Bank Group

In 2015, in the capacity of exploration and production operators, we have endorsed the Zero Routine Flaring by 2030 initiative. Our goal is to scale the new E&P projects to zero flaring under normal operating conditions.

Learn more about this initiative.

We mean business

We have joined the We Mean Business coalition, integrated in the NAZCA Tracking Climate Action initiative of the United Nations Framework Convention on Climate Change (UNFCC).

Galp has made a commitment to take action, especially on climate issues, by using an internal carbon price in the investment decision-making processes, by the corporate commitment assumed in the Climate Change Policy, and by implementing the TCFD recommendations.

This platform, which consists of a group of organizations that work with the business sector and investors worldwide, promotes the transition into a low-carbon economy. The platform also fosters proactive climate action, encouraging the creation of new political milestones regarding climate change.

Learn more about this initiative.