No sector sits more squarely at the centre of the climate transition than oil and gas. The ISSB's industry-based guidance, derived from SASB standards, provides some of the most granular disclosure metrics for any industry — from methane tracking and reserves valuation to carbon pricing exposure and transition capital allocation.
For oil and gas companies reporting under ISSB-aligned frameworks, the question is not whether climate is material. It is how comprehensively and credibly you disclose it.
SASB Classification: Oil & Gas
Oil and gas falls under the Extractives & Minerals Processing sector in the SICS classification, with four sub-industries:
- Oil & Gas Exploration & Production (EM-EP) — upstream E&P, the focus of this article
- Oil & Gas Midstream (EM-MD) — pipelines, processing, storage
- Oil & Gas Refining & Marketing (EM-RM) — refineries, fuel distribution
- Oil & Gas Services (EM-SV) — drilling, oilfield services, equipment
Each sub-industry has its own disclosure topics, though GHG emissions, water management, and safety are common across all four. The E&P sub-industry has the most extensive climate-specific metrics. For the related mining sector, see our mining and resources guide.
Key Disclosure Topics
GHG Emissions
Oil and gas companies face the most detailed emissions disclosure requirements of any sector. The SASB metrics require disaggregation beyond simple Scope 1, 2, and 3 totals:
Scope 1 includes:
- Combustion emissions from on-site power generation and equipment
- Flaring of associated gas
- Venting of methane and CO2
- Fugitive emissions from equipment leaks, well completions, and processing
Scope 2 covers purchased electricity and steam, relevant primarily for processing facilities, LNG liquefaction plants, and pipeline compressor stations.
Scope 3 is dominated by Category 11 — Use of Sold Products — the combustion of oil, gas, and refined products by end users. For most E&P companies, this represents 70-90% of total lifecycle emissions. Other material Scope 3 categories include upstream transportation (Category 4) and purchased goods and services (Category 1).
The industry guidance requires emissions intensity metrics (e.g., tonnes CO2e per barrel of oil equivalent) alongside absolute figures, enabling comparisons across companies of different sizes.
Methane Emissions
Methane receives dedicated attention in the ISSB industry guidance, separate from aggregate GHG reporting. This reflects its outsized climate impact (roughly 80 times the warming potential of CO2 over a 20-year period) and the growing regulatory focus on methane reduction.
Key metrics include methane emissions as a percentage of natural gas produced, methane intensity rates, and disclosure of leak detection and repair (LDAR) programmes. The EU Methane Regulation, US EPA methane rules, and the Global Methane Pledge all create regulatory momentum around this metric.
Reserves Valuation and Stranded Assets
This is where ISSB disclosure becomes strategically consequential for oil and gas companies. The SASB-derived metrics include:
- Sensitivity of proved and probable reserves to carbon pricing and demand scenarios
- Capital expenditure allocation between fossil fuel development and low-carbon alternatives
- Asset impairment assessments under different climate and energy transition pathways
IFRS S2's climate scenario analysis requirement effectively means oil and gas companies must assess whether their reserves will be economically recoverable under a range of futures — including pathways consistent with well-below 2C and net-zero by 2050.
High-cost reserves (deep water, oil sands, Arctic) face the most significant stranding risk under aggressive transition scenarios, while low-cost, low-emission reserves may retain value even in a contracting market.
Carbon Pricing Exposure
Carbon pricing mechanisms are already material for oil and gas companies in multiple jurisdictions: Canada's federal carbon price (rising to C$170/tonne by 2030), the UK ETS, the EU ETS, and Australia's Safeguard Mechanism.
The industry guidance includes metrics on:
- Revenue and operating costs subject to current carbon pricing
- Anticipated exposure under announced policy trajectories
- Internal carbon price used for investment decisions
- Sensitivity analysis of project economics to carbon price scenarios
Transition Planning
Investors increasingly scrutinise how oil and gas companies are allocating capital between legacy fossil fuel assets and low-carbon investments. The SASB guidance captures:
- Capital expenditure split between hydrocarbon development, renewable energy, carbon capture, and other low-carbon technologies
- Production forecasts and how they align with stated climate commitments
- Diversification strategy — LNG as a transition fuel, hydrogen production, geothermal energy, biofuels
Companies claiming net-zero commitments face particular scrutiny: if capital allocation remains overwhelmingly skewed toward fossil fuel development, the credibility of transition plans will be questioned.
Water Management
Water use in drilling (particularly hydraulic fracturing), processing, and refining is a material topic, especially in water-stressed regions. The metrics include total water withdrawn and consumed, produced water volumes, and water recycling rates.
Produced water management is a specific disclosure topic — oil and gas operations generate large volumes of produced water that require treatment or disposal, with regulatory and environmental implications.
Physical Risk Exposure
Oil and gas infrastructure faces direct physical climate risks:
- Offshore platforms: hurricane and cyclone exposure in the Gulf of Mexico, North Sea, and tropical regions
- Arctic operations: permafrost thaw destabilising foundations and pipelines
- Coastal infrastructure: sea-level rise affecting refineries, LNG terminals, and export facilities
- Pipeline networks: ground movement from freeze-thaw cycles, flooding, and wildfire
Climate Risks and Opportunities
Transition Risks
- Demand destruction: declining oil and gas demand under net-zero pathways, particularly for thermal coal and high-emission fuels
- Carbon pricing: escalating carbon costs eroding margins, especially for high-emission operations
- Regulatory tightening: stricter emissions limits, methane regulations, flaring restrictions, and environmental permitting delays
- Investor divestment: institutional investors reducing fossil fuel exposure, increasing cost of capital
- Stranded assets: high-cost reserves becoming uneconomic under transition scenarios
Physical Risks
- Extreme weather on infrastructure: hurricane damage to offshore platforms, flooding of onshore facilities
- Water scarcity: reduced availability for hydraulic fracturing and processing in drought-prone regions
- Permafrost degradation: Arctic infrastructure instability
Opportunities
- Natural gas as transition fuel: lower-emission alternative to coal for power generation
- Carbon capture, utilisation, and storage (CCUS): leveraging subsurface expertise and infrastructure
- Hydrogen production: blue hydrogen from natural gas with CCUS, or green hydrogen using renewable electricity
- Geothermal energy: applying drilling expertise to geothermal development
- Critical minerals: some oil and gas companies are diversifying into lithium and other energy transition minerals
Jurisdictional Context
Canada
Canada's oil sands, conventional E&P, and LNG export sector make it one of the most carbon-intensive major economies. TSX-listed oil and gas companies are the primary audience for CSDS 1 and 2, with the federal carbon price providing a clear and escalating financial materiality signal. The CSDS materiality assessment framework is directly applicable.
United Kingdom
London-listed majors (Shell, BP) and North Sea operators face UK SRS requirements from January 2027. The UK's net-zero 2050 commitment, North Sea Transition Deal, and UK ETS create a multi-layered transition risk environment.
Australia
Australia's LNG sector (Woodside, Santos) places the country among the world's largest gas exporters. Group 1 entities under AASB S2 must disclose climate risks from 1 January 2025, with the Safeguard Mechanism's declining baselines creating transition risk for large emitters.
How to Conduct an Oil & Gas Materiality Assessment
- Identify your SICS sub-industry — E&P, Midstream, Refining & Marketing, or Services. Each has specific disclosure topics.
- Map your emissions profile — Scope 1 (disaggregated by source: combustion, flaring, venting, fugitive), Scope 2, and Scope 3 (particularly Category 11 for E&P companies).
- Assess reserves exposure — Run sensitivity analysis on proved and probable reserves under different carbon price and demand scenarios.
- Evaluate carbon pricing exposure — Map current and anticipated carbon costs across your operating jurisdictions.
- Conduct scenario analysis — Use IEA or NGFS scenarios to stress-test your strategy and capital allocation.
- Document your reasoning — Record which metrics are material and why, with reference to the ISSB industry-based guidance.
For the full four-step ISSB materiality process, see our ISSB vs. ESRS process analysis. Companies also subject to CSRD/ESRS will find significant overlap in the climate metrics.
How Materiality Master Can Help
Materiality Master provides a structured approach to ISSB-aligned materiality assessments for oil and gas companies. Whether you report under CSDS, UK SRS, or AASB S2, the platform guides you through industry-relevant risk identification and audit-ready documentation. See our pricing.
Frequently Asked Questions
What Scope 3 categories are most relevant for oil and gas?
Category 11 (Use of Sold Products) is by far the largest — typically representing 70-90% of total lifecycle emissions for oil and gas companies. Other material categories include Category 4 (Upstream Transportation), Category 6 (Business Travel), and Category 1 (Purchased Goods and Services).
Does ISSB require oil and gas companies to disclose reserves under climate scenarios?
IFRS S2 requires climate scenario analysis including assessment of strategy resilience. For oil and gas, this effectively means assessing how reserves valuations change under different climate and energy transition scenarios. The SASB-derived metrics include specific reserves-related disclosures.
How does carbon pricing affect ISSB disclosures for oil and gas?
Carbon pricing exposure is a key transition risk. Companies must disclose how current and anticipated carbon pricing mechanisms affect their financial position — including impacts on operating costs, capital expenditure decisions, and asset valuations. The industry guidance includes metrics on carbon price sensitivity.
Are methane emissions specifically addressed in ISSB?
Yes. The industry-based guidance for oil and gas includes methane emissions as a specific disclosure metric, separate from aggregate GHG reporting. This reflects the growing regulatory and investor focus on methane as a high-impact, short-lived greenhouse gas.
