Big Oil Sells Billions Of Dollars Of Assets To Less Transparent Firms

Oil companies with climate goals and commitments are increasingly selling assets to private and less scrutinized operators with lower environmental standards, which does not help the global push to cut overall emissions, Environmental Defense Fund (EDF) said in a new report on Tuesday.

Deal-making in the oil and gas industry has been increasingly shifting to companies with lower climate commitments becoming buyers of more and more oil and gas assets over the past five years, the U.S.-based non-governmental organization said in the study.

"If assets move from industry leaders on the energy transition to industry laggards, emissions could increase and transparency could decrease, regardless of why M&A transactions take place," the fund said in its report titled "Transferred Emissions: How Risks in Oil and Gas M&A Could Hamper the Energy Transition."

After analyzing global upstream oil and gas M&A data from 2017 through 2021, EDF found that assets are flowing from public to private markets at a significant rate and that assets are increasingly moving away from companies with environmental commitments.

Since 2017, a total of 155 deals worth $86.4 billion have moved assets away from net-zero-aligned companies, the report found. Moreover, 298 deals worth $144.9 billion have transferred assets from companies with flaring commitments to those without, and 211 deals totaling $115.6 billion have pushed assets away from companies with methane goals to companies without explicit methane goals.

"The movement of upstream oil and gas facilities to private markets with traditionally less transparency and to companies with reduced environmental commitments suggests that a growing number of assets are at risk of weak climate stewardship," according to one of the key findings in the report.

"These transactions can make it look as though sellers have cut emissions, when in fact pollution is simply being shifted to companies with lower standards," Andrew Baxter, director of energy transition at EDF, said in a statement. "Regardless of the sellers' intent, the result is that millions of tons of emissions effectively disappear from the public eye, likely forever. And as these wells and other assets age under diminished oversight, the environmental challenges only get worse." 

By Charles Kennedy for Oilprice.com

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