Material Risks Risk Management Approach Environmental Risk The Company’s oil and gas exploration, development and production activities carry inherent environmental risks, including accidental spills, leaks or other incidents that could cause environmental harm. Such events may result in substantial rehabilitation and remediation costs, third-party claims and regulatory penalties, even when operations are conducted in compliance with environmental laws and regulations. The Company operates under strict environmental management systems and complies with all applicable environmental laws and permit conditions. Regular monitoring, maintenance and emergency response planning are in place to prevent and contain spills or leaks, and staff and contractors receive training in environmental protection and incident response. Insurance and ongoing engagement with regulators and local stakeholders further reduce potential financial and reputational impacts, though some residual risk remains. Climate Change Risk The Company’s operations and financial performance may be affected by both the physical impacts of climate change and by evolving legislation and regulation addressing greenhouse gas emissions. Potential measures include carbon pricing, emission limits, stricter permitting requirements and mandatory reporting, which could raise energy and production costs, reduce profitability and constrain future development opportunities. Regulation of greenhouse gas emissions in jurisdictions where the Company or its customers operate, combined with shifting market sentiment and reduced investment appetite for hydrocarbon projects, may also limit access to capital or offtake opportunities and negatively affect project economics. The Company incorporates climate-related physical and regulatory risks into strategic and operational planning. Site selection, facility design and maintenance programs factor in resilience to extreme weather, flooding and temperature variations, while business continuity and emergency response plans are regularly tested. Carbon and energy cost scenarios are embedded in long-term financial models, and operational practices aim to improve energy efficiency and reduce emissions. The Company monitors the phase-in of mandatory climate-related financial disclosure under AASB S2 Climate-related Disclosures and is assessing the reporting group and commencement date applicable to it. The Company also engages with regulators, industry groups and investors to stay ahead of evolving policy and market expectations. These actions help reduce exposure to both physical and regulatory climate-related risks, though some residual risk remains. Health, Safety and Social Sustainability Risk The Company’s activities expose its personnel, contractors and the communities near its operations to health and safety hazards. A serious incident could result in injury or loss of life, regulatory action, liability, suspension of operations and reputational damage. The Company also operates in a jurisdiction where labour, community and human rights expectations differ from those in Australia, and where it relies on local contractors and a state counterparty over whose practices it has limited control. Failure to maintain the support of host governments, regulators and local communities, or an adverse finding in relation to labour or human rights practices in the Company’s supply chain, could disrupt operations, restrict access to capital and damage the Company’s reputation. The Company applies health, safety and environment standards to its own operations and requires contractors to comply with them, supported by induction, training, incident reporting and investigation, and emergency response planning. Health and safety performance is reported to the Board. The Company engages directly and regularly with host governments, regulators and local communities, applies its Code of Conduct and its anti-bribery and corruption policy to all personnel and contractors, and conducts due diligence on contractors and counterparties before engagement. Key Personnel Risk The Company operates with a small executive and technical team and depends on a limited number of individuals for its technical, commercial, financial and governance functions. The loss of one or more of those individuals, or an inability to attract or retain suitably qualified people which may be exacerbated by the Company’s funding position, by measures taken to reduce or defer remuneration, and by the specialised nature of operating in Cuba could delay the Company’s programs, weaken its internal control environment and adversely affect its performance. The Board monitors the Company’s resourcing and succession requirements and the concentration of knowledge within the team. Key processes, records and technical data are documented so that they are not dependent on any single individual, and specialist external advisers are engaged to supplement in-house capability where required. Remuneration arrangements are structured, within the Company’s means, to retain critical personnel. Governance and Risk continued 42 Melbana Energy Limited Annual Report 2026
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