Global Report: Climate Change Exposes the Oil and Gas Industry to Risk

Changes in Climate Could Impact Oil and Gas Company's Assets, Operations and
Safety

ARMONK, N.Y., Nov. 3 /PRNewswire-FirstCall/ -- Over three quarters of the
world's oil and gas companies surveyed believe inevitable climate change could
impact their business: increasing downtime, system failures and safety; but
only 19 percent are taking action, says a new Acclimatise report backed by IBM
(NYSE: IBM).

(Logo: http://www.newscom.com/cgi-bin/prnh/20090416/IBMLOGO)

"The Oil and Gas industry is an important contributor to our society and
economy, so if anything impacts the industry it could well impact people at
home, at work, on the move, or even their personal finances," said Allan
Roberts, IBM's Industrial Strategy & Change Leader, IBM Global Business
Services, UK & Ireland. "While oil and gas companies are typically well run
and have systems for monitoring risks, they have been exposed to problems with
their major projects and operations in the past. Evidence in the report shows
companies may not be fully appreciating the risks posed by climate change or
have in place responses which are robust."

The report titled "Global Oil & Gas - The Adaptation Challenge" is based on
the Carbon Disclosure Project's annual request for investor information that
was sent to the world's largest 128 oil and gas companies globally (based on
market capitalisation). Analysed using the Acclimatisation Index(TM).(
)Methodology, the report identified the top five impacts of climate change and
the industry implications.

Top Five Industry Impacts of Climate Change
Increased pressure on water resources: Concerns over changing rainfall
patterns, water shortages, poor water quality, drought and flooding is
significantly increasing the demand for water. Growing competition for
available resources could create operational problems for companies which rely
heavily on water for oil and gas production. The demand may also create
conflicts with local communities and other water users throughout the world
changing the risk landscape for oil and gas companies. Nearly all companies
surveyed did not appear to recognise the risk landscape is changing - only 6%
reported knowledge of potential civil and geo-political risks and 3%
identified adverse risks for local communities.

Physical asset failure: The report revealed that many existing plants and
equipment have been designed on the basis of historic climatic conditions and
may not withstand changing environmental conditions. Fluctuating temperatures
can affect efficiency and performance of physical assets leading to transport
disruption, damaged buildings and increased operational delays and costs. Only
6% of respondents indicated they were taking actions to manage disruptions to
off-site utilities (energy, communications, water and waste treatment).

Employee health and safety risks: Volatile working conditions in extreme
environments and physical assets which are potentially not suitable for the
changing climatic conditions have the potential to impact the health and
safety of employees. However only 1.5% of respondents reported to incorporate
climate change considerations into their health and safety risk assessments.
Employer and public liability insurance cover may be compromised if companies
fail to take climate change into account during health and safety risk
assessments.

Drop in value of financial assets: To meet the growing demand for energy, oil
and gas companies need to continue securing investment for new exploration,
production and manufacturing. Potential investors and stakeholders are placing
greater importance on the business impacts of climate change as the risks
impact cost and revenue drivers. Insurance costs could potentially rise
because of greater chances of physical plant damage due to weather events, an
issue only recognised by 10% of respondents. The current reported value of
proved reserves may also be affected by companies failing to take into account
the full impact of climate change. This could result in changes to the
disclosed value of reserves which has major financial implications.

Damage to corporate reputation: As knowledge and awareness of climate change
grows, any failure to monitor and report the impacts of climate change on
social and ecological resources is increasingly likely to harm a company's
reputation. Contractual relationships that do not adequately foresee and
manage risks driven by climate change, may damage the company's reputation
with stakeholders as the risk of parties turning to litigation increases.

"It is difficult to justify the position taken by any company that fails to
assess the vulnerability of existing and future assets to acute and chronic
changing climatic risks, given the information we now have," said John Firth,
Chief Executive Officer and Co-Founder, climate change adaptation specialists
Acclimatise. "Companies that develop an integrated approach, recognising that
we no longer have a stable climate, will be the winners. This is not merely an
environmental issue, it is about bottom line consequences and the future
viability of oil and gas companies."

Drivers for Change
Given the Oil and Gas industry's ability to innovate there is no reason why it
will not continue to be a major contributor to society and the economy of the
future. There are a number of drivers for change that will influence the level
and rate of innovation.

Cost/revenue drivers - Operating costs at refineries could increase in
response to changes in asset efficiency and resilience with higher ambient air
temperatures. Disruptions to transport links due to permafrost thaw are
already having significant impacts with companies having to hold and maintain
larger on-site spare parts and materials stores. Operational costs could
increase in response to changes in design standards for offshore platforms.

Stakeholder pressure - Investors and other stakeholders, including market and
financial analysts, governments and regulatory agencies, research
institutions, consumers, local communities and NGOs - are already starting to
place greater pressure on oil and gas companies to address climate risks and
opportunities.

New regulatory landscapes - Although new regulatory policies are being
developed in many countries there remains a great deal of uncertainty
regarding the scope, content and format of future legislation on emissions.
Greater certainty about the future regulatory landscape is required to
encourage companies to invest in alternatives to fossil fuels and develop
cleaner and sustainable energy sources.

In the United Kingdom the Climate Change Act 2008 gives the government an
adaptation reporting power that requires oil and gas companies to assess and
disclose the impacts climate change might have on their business. The UK
Government recently updated the Petroleum Act, tightening the laws on
decommissioning, making it compulsory for companies to take the impacts of
climate change into account.

The US Securities and Exchange Commission ask publicly-listed companies to
disclose climate threats to their bottom lines in annual reporting.

Opportunity to Improve
Acclimatise and IBM have jointly prepared a set of 10 Prepare-Adapt questions
to help oil and gas executives take informed steps towards building corporate
resilience to inevitable climate change.

To start, a company should undertake a high-level assessment of how climate
change could impact their business model. The next step is to analyse the
individual areas that could have the greatest material impact on performance -
two areas of consideration could be Non-Market Strategy and Asset Lifecycle
Management. Finally companies need to adapt reporting and performance
management to incorporate risks arising from climate change.

Paul Simpson, Chief Operating Officer, Carbon Disclosure Project, said, "This
report shows how important it is for the oil and gas sector to plan for a
changing climate. Issues such as water shortages and changing weather patterns
and temperatures will impact infrastructure, operations, revenues and costs.
As a result, investors want to know how oil and gas companies are dealing with
these risks and planning for them in the future. This report helps answer
those questions."

For a full copy of the report:
http://www-05.ibm.com/uk/green/cdp2009/oil_and_gas.pdf

Methodology
The analysis has been undertaken using our Acclimatisation Index(TM)
methodology. This enables a semi-quantitative analysis of the responses
recognising the scope of the questions.

The Index can take into account information from other sources to provide a
more comprehensive analysis if needed. The Index also allows a relative score
for each company to be calculated, although these scores are not available as
part of this project.

The Acclimatisation Index(TM) has been used to analyse the resilience of
global oil and gas companies to climate change in response to questions
contained within sections 1 and 4 of the Carbon Disclosure Project
questionnaire. It describes how global oil and gas companies understand the
risks and opportunities they face as a result of the changing climate, and how
they plan to adapt to them.

For more information on IBM go to: www.ibm.com/uk/green.

For more information on Acclimatise:

Acclimatise is a risk management consultancy focused on helping its clients
become resilient to the impacts of inevitable climate change. Founded in 2004
Acclimatise advises some of the world's largest corporates, banks and pension
funds. It also provides strategic guidance to governments, government
agencies and to cities.

For more information on Carbon Disclosure Project:

The Carbon Disclosure Project (CDP) is an independent not-for-profit
organization holding the largest database of corporate climate change
information in the world. CDP gathers data through its annual Information
Requests on behalf of 475 institutional investors with assets under management
of $55 trillion, purchasing organizations and government bodies. Since its
formation in 2000, CDP has become the gold standard for carbon disclosure
methodology and process, providing primary climate change data to the global
market place.

For more information, visit www.cdproject.net.

PRESS CONTACTS:
Lucy Chapman
External Relations - IBM UK Communications
+44 (0) 20 7021 8911
LUCYCHAPMAN@uk.ibm.com

Sarah Spencer
IBM US
+ 917-472-3728
+ 646-241-3168
scspence@us.ibm.com

John Firth
CEO and co-founder
Acclimatise
+44 (0) 1623 884347
+44 (0) 7769 706184
j.firth@acclimatise.uk.com
www.acclimatise.uk.com

SOURCE IBM

Media, Lucy Chapman, External Relations - IBM UK Communications,
+44(0)20-7021-8911, LUCYCHAPMAN@uk.ibm.com, or Sarah Spencer, IBM US,
+1-917-472-3728, or +1-646-241-3168, scspence@us.ibm.com; or John Firth, CEO
and co-founder, Acclimatise, +44(0)1623-884347, or +44(0)7769-706184,
j.firth@acclimatise.uk.com