Big Oil’s sales spree to cut emissions may leave fossil fuel assets in weaker hands

Big Oil’s sales spree to cut emissions may leave fossil fuel assets in weaker hands

The 2010 Deepwater Horizon disaster spilled more than three million barrels of oil and would eventually cost operator BP and its partners more than $70bn in remediation costs.

What might have happened if the Deepwater partners had not been financially robust companies but instead highly leveraged private equity-backed independents? Who would have picked up the tab in the face of disaster?

As the energy transition evolves, companies across the oil, gas and utilities sectors are under pressure to commit to becoming "Net Zero" carbon emitters by dates well within the operating lifetimes of many of their assets. Environmental, social and governance criteria, high-profile court cases and disinvestment campaigns are leading the biggest companies to restructure to conform to a zero-carbon consensus.

But much of the restructuring will involve sales of assets rather than closures. Leading companies are selling oil and gas assets to smaller companies, which may not have the financial strength to meet the challenges that catastrophic failures can present.

A leading US utility, Exelon Corp announced in February that it will spin off its generation and electricity supply business, about 27 per cent of which is natural gas-fired, into a new, "competitive" company, while retaining regulated transmission and distribution assets.

In the US