Oil and gas giants are increasingly selling off dirty assets to private firms, amplifying concerns that the fossil fuel industry’s traditional dealmaking is not compatible with a net-zero world.
It comes at a time when oil and gas majors are under immense pressure to set short and medium-term targets in line with the goals of the landmark Paris Agreement.
It is widely recognized that this accord is critically important to avoid the worst of what the climate crisis has in store.
Research published last week by the non-profit Environmental Defense Fund shows how oil and gas mergers and acquisitions, which may help energy giants execute their transition plans, do not help to cut global greenhouse gas emissions.
To be sure, the burning of fossil fuels, such as coal, oil, and gas, is the chief driver of the climate crisis and researchers have repeatedly stressed that limiting global heating to 1.5 degrees Celsius will soon be beyond reach without immediate and deep emissions reductions across all sectors.
EDF’s analysis of over 3,000 deals between 2017 and 2021 shows how flaring and emissions commitments disappear when tens of thousands of wells are passed from publicly traded companies to private firms that have no oversight or reporting requirements to shareholders.
These same often obscure private companies tend to disclose little about their operations and can be committed to ramping up fossil fuel production.
Such deals are growing in both number and scale, EDF’s research says, climbing to $192 billion in 2021 alone.
“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,” said Andrew Baxter, director of the energy transition at EDF.
“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,” he added.
The report says the surge in the number and scale of oil and gas dealmaking has coincided with growing fears among investors about losing the ability to assess company risk or hold operators accountable to their climate pledges.
It also suggests implications for some of the world’s largest banks, many of which have set net-zero financed emission targets. Since 2017, five of the six largest U.S. banks have advised on billions of dollars worth of upstream deals.
As a result, the analysis calls into question the integrity of Big Oil and Wall Street’s commitment to the planned energy transition, a shift that is vital to avoid a cataclysmic climate scenario. Source: CNBC