Drone inspecting operations

As described in the risk management section, we evaluate and track our climate-related risks through our SD Risk Register and Climate Change Action Plan. Those risks broadly fall into the categories of transition risks (including climate- related policy and emissions management) and physical climate-related impacts.

Our planning time horizons are developed according to the time required to realize the majority of the net present value of our projects and the time we expect it will take for the risks to potentially manifest. Our GHG forecasting and financial planning processes are used to determine risks and opportunities that could have a material financial impact for each period.

Near-term, one to five years: Complete short-cycle drilling campaigns and small projects. Our near-term climate- related risks are generally government policy-related and managed at the business unit level through policy advocacy and technology to reduce emissions.
Medium-term, six to 10 years: Complete most major projects and revise our portfolio if required. Medium-term risks take longer to impact our business and may include emerging policy that is not yet fully defined. These risks are managed by business unit planning but, if significant, may also be managed by corporate strategies and company-wide risk assessments.
Long-term, 11 years and beyond: Generally, long-term risks are managed by our scenario analysis and Climate Risk Strategy, as they include long-term government policy, technology trends and consumer preferences that affect supply and demand. They may also include risks that align with long-term physical climate scenarios.

Time horizon		Risks	Potential impact
Near-term	1-5 years Aligns with short cycle drilling and small projects	Transition risks
		Climate change policy, including carbon tax
		Mandated carbon pricing in various jurisdictions where we operate Canada: Alberta Emissions Management and Climate Resilience Act and Technology Innovation and Emissions Reduction (TIER) Regulation Canada: British Columbia Greenhouse Gas Industrial Reporting and Control Act (GGIRCA) and Output Based Carbon Pricing System EU: European Emissions Trading Scheme (EU ETS) Norway: Norway Carbon Fee & EU ETS allowances	Carbon pricing adds increased operational costs and would be a factor impacting product demand. Incentivizes GHG reductions.
		EU Carbon Border Adjustment Mechanism (CBAM) seeks to put a price on carbon for carbon-intensive traded goods. The transition phase for the CBAM began in October 2023, during which importers began reporting emissions data to the EU.	While oil and gas production is currently outside of CBAM, a review of industries to consider including in the future is due at the end of the transition phase in 2025.
		GHG emissions regulations Examples
		EPA’s New Source Performance Standards (OOOOb) and Emissions Guidelines (OOOOc) finalized in early 2024 for U.S. assets. The final rule could result in additional capital expenditures and compliance, operating and maintenance costs. EU Methane Regulation was adopted in 2024 to reduce methane emissions in the energy sector across Europe.	The final rule could result in additional capital expenditures and compliance, operating and maintenance costs. Potential impacts to price realizations for LNG and crude marketing imports and increased costs associated with reporting burden.
Medium-term	6-10 years Aligns with major project timelines and ability to adjust portfolio	Transition risks
		Emerging policy
		Carbon pricing policy or regulations that are not yet fully defined in regions we operate.	Carbon pricing and/or regulations adds increased operational costs and would be a factor impacting product demand. Incentivizes GHG reductions.
		Access to capital markets
		Changing preferences of stockholders, financial institutions and other financial market participants.	Potential limit or discontinued investments, insurance and funding to oil and gas companies. As public pressure continues to mount on the financial sector, our costs of capital may increase.
		Physical risks
		Climate-related physical changes
		Impacts on permafrost Fresh water constraints Wildfire Severe weather	Increased costs in both design and operation as well as potential business interruption from severe weather events.
Long-term	11+ years Aligns with scenario analysis	Transition risks
		Market risk
		Our business may be affected by long-term government policy, technological advances and consumer preferences that affect supply and demand for oil and gas.	Lower sales volumes and/or margins due to lower demand for oil and gas products.
		Physical risks
		Chronic and acute physical climate changes
		Our facilities and operations could potentially be impacted by more frequent extreme weather events (flooding, drought, wildfire and storms) and chronic hazards (rising temperatures and sea levels).	Increased costs in both design and operation as well as potential business interruption from severe weather events.

Near, medium and long-term risks

Our position

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