There can’t be many organisations for whom the transition to net zero isn’t already a major challenge and strategic objective, but when your core business is processing and selling hydrocarbons, this challenge is elevated to a completely different level.

Speaking at a Member Spotlight webinar earlier this month, ACA-qualified Andreas Shiamishis, CEO of Hellenic Petroleum, explained how the organisation he runs has transformed its business priorities and devised a new business strategy to move to a low-carbon future.

Hellenic Petroleum has grown over the last 50 years from a group of local market serving government entities to being one of the largest downstream groups in south-east Europe, with an operational presence in eight countries and activities across the energy value chain, including oil sector exploration for hydrocarbons, refining, supply, trading and marketing, as well as activities in power and gas. The group has revenues of around $10bn and $5bn of capital employed.

Shiamishis says it was the 2015 Paris Agreement, a legally binding international treaty on climate change, that marked the most relevant turning point for the sector in terms of its focus on energy transition. The Treaty’s goal is to limit global warming to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels. 

Meanwhile, the combination of regulatory constraints, changing market dynamics and a growing focus on ESG across capital markets present added impetus to action. However, securing the supply of energy while reducing the environmental impact of an industry with a legacy firmly rooted in carbon is no simple challenge. “Plain sailing it is not,” Shiamishis admits.

“It’s a major challenge for all energy companies to reconsider their business model. It’s something we need to take on board because if we ignore this and engage in greenwashing, we will soon be out of business,” Shiamishis says.

In particular, balancing the wide spectrum of considerations including technical and capacity issues, capital allocation and the challenges of entering newer and riskier projects against a backdrop of rising energy prices and geopolitical turmoil is not for the faint-hearted.

Hellenic Petroleum’s bold strategy is outlined in Vision 2025, published early last year to paint a picture of the group’s ambition as it looks to redefine its business portfolio. “It’s not intended to be a five-year plan, it’s a much longer strategic vision with a strong sustainability and ESG focus to push the group to think and act with tomorrow’s world in mind,” Shiamishis explains. “For the first time in 30 years, we are venturing outside our comfort zone rather than just continuing to add size to what we have.”

In some respects, starting with a clean sheet of paper may have been easier, he admits, “but this is an option we do not have and if treated properly it is also an advantage. We live in a transitional period and our strategy seeks to preserve and grow the group’s current business value while at the same time making it compatible with the drive to net zero.”

The group has set a new ambitious target to improve its carbon footprint by 50% by 2030. Over the next five to seven years, more than 60% of its €4bn capital allocation budget has been assigned to green energy initiatives, including investments in biofuels, carbon capture technologies and chemical recycling. At the same time, it is ramping up investment in green energy, becoming one of the fastest growing renewables companies in Greece in the last 18 months. 

“Starting with less than 30MW of operating assets in renewables in 2019, we have in operation today some 300MW of operating assets and about 2GW of pipeline not including new projects in offshore wind that we are currently investigating with some of the biggest companies in the world in this domain.” The inauguration of Hellenic Petroleum’s 204MW photovoltaic park 120km south-west of Thessaloniki is imminent. It is the largest renewable energy source (RES) park in Greece and the largest PV in Europe with bifacial panels.

But the new strategy is not just about doing new things, it’s also about not necessarily continuing to do the old things, Shiamishis says. Although the group will maintain some offshore plots for natural gas exploration – recognised as a bridge fuel for the next 20-30 years – Hellenic Petroleum has announced the termination of onshore oil exploration. 

Good governance is key to a successful transition, Shiamishis says. Performance in this respect has been less than perfect due to its public sector ownership origins, he admits. However, this changed last year with new corporate governance legislation in Greece supporting radical changes to the group’s board composition. In particular, a focus on greater board diversity has been a game changer, Shiamishis says. “In the last few months, since we’ve had the new more independent and properly elected board, we’ve seen how good governance can support management deliver on its strategic objectives.”

Meanwhile, a redesign of the corporate structure has also helped to facilitate change, Shiamishis says, by better reflecting the specific business issues, risk profiles, cash-flow drivers and financing solutions that different parts of the business face. “For example, running a highly cyclical commodity business is totally different to running a renewables investment portfolio.”

Shiamishis is confident that Hellenic Petroleum has been quick to appreciate the challenges ahead and put together a holistic plan to address them. “The main challenge for companies of our size is often the misalignment between what we want as a society and the cold and ruthless reality of capital markets,” he says. “We need to preserve our value, but at the same time grow in a direction which is the future of energy.” 

• Watch the interview with Andreas Shiamishis in full.
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