Big Oil Companies Are Dumping Dirty Assets

Will it make a difference in carbon emissions, or is it just a giant shell game?

Shell Drilling in the gulf of Mexico
Shell's Perdido offshore drilling and production platform is the world's deepest offshore rig.

Gary Tramontina/Corbis via Getty Images

The conventional wisdom is that 100 companies are responsible for 71% of carbon emissions, and The Guardian article that started all this noted that "ExxonMobil, Shell, BP, and Chevron are identified as among the highest emitting investor-owned companies since 1988."

Since then, these big investor-owned oil companies have been having issues; as Treehugger writer Sami Grover noted in a post titled "Exxon, Shell, and Chevron All Lose Big on Climate Battles," the oil majors are facing demands to reduce their carbon dioxide emissions.

Now the oil majors have been having a fire sale of their dirtiest assets. According to Anji Raval in Financial Times, "Energy consultancy Wood Mackenzie says ExxonMobil and Chevron in the US and BP, Royal Dutch Shell, Total and Eni in Europe have sold $28.1bn in assets since 2018 alone. Now they are targeting further disposals of more than $30bn in the coming years."

Top 10 emitters
Top 10 emitters.

 CDP Carbon Majors Database

Back in Treehugger's post on the hundred companies, we noted the investor-owned oil majors barely made it on to the top 10 of the biggest carbon producers: 8 out of 10 were government entities. Pretty soon, Exxon and Shell might not be in the top ten at all. Apparently, all those assets they are selling are being snapped up by those government entities and other eager buyers.

According to the FT:

“The quickest way to shrink emissions as a major company is to shed assets so you can hit climate-related targets,” said Biraj Borkhataria at RBC Capital Markets. “But asset sales do nothing for climate change, you’re just moving emissions from one hand to another.”

So it is all a Shell game, so to speak, moving assets from public companies to private ones, or to government entities that don't worry much about Dutch courts or emissions. The supply side stays the same, which is why I previously wrote we have to work on the demand side: "We are buying what they are selling and we don't have to."

Jason Bordoff of Columbia University’s Climate School and Center on Global Energy Policy, seen in Treehugger here, says much the same thing, telling the FT:

"Selling an oilfield does not reduce oil-related emissions if demand remains unchanged,” he adds. “Oil demand needs to fall sharply to meet our climate goals . . . but today climate ambition remains far ahead of reality”

Larry Fink, the CEO of BlackRock, said much the same thing at a G20 finance meeting in Venice, warning of unintended consequences of asset sales. He published his speech on LinkedIn and notes there is "a massive incentive for public companies to divest dirty assets. By some estimates, by the end of the decade, oil and gas companies will divest more than $100 billion of assets." But he doesn't see it as changing anything.

"Divesting, whether done independently or mandated by a court, might move an individual company closer to net zero, but it does nothing to move the world closer to net zero. Indeed, it could even have the opposite effect. As private and state-owned companies produce a greater and greater share of oil and gas, there will be less scrutiny and less disclosure around global emissions."

He also makes it very clear that consumption is as important as production.

"Second, as we move forward with the energy transition, we need to make sure that we are pushing just as hard on the demand side as we are on the supply side. Otherwise, we risk a supply crisis that drives up costs for consumers – especially those who can least afford it – and risks making the transition politically untenable."

He notes that with all the pressure on the supply side and none on the demand side, prices are being driven up.

"While some see higher prices as a way to constrain demand, rising costs in the energy sector will only sow greater economic inequality and a world of “haves and have nots.” This will feed political polarization, and we’ve already seen how populist leaders can undo years of work and progress with little more than a single tweet."

It's hard for a Treehugger to be finding common ground with a plutocrat like Fink, but the point that he, Bordoff, and dare I say, some of us at Treehugger have been trying to make: If we don't reduce demand for fossil fuels then the oil entities will just keep producing them.