Supermajors are scrubbing their greenhouse gas emissions by offloading dirtier assets
Energize Weekly, May 31, 2023
Seven of the world’s “supermajor” oil companies are cleaning up their greenhouse gas emissions in large part by offloading some of the dirtiest assets to small companies who are often poor environmental performers, according to a Columbia University study.
“The supermajors have established a ‘practice of spinning off or selling late-life assets to lesser producers’ – often transferring environmental retirement obligations along with the assets,” the analysis said. “These sales may enable the supermajors to evade asset retirement obligations.”
Corporate disclosure standards, however, in the European Union, the United Kingdom and the U.S. are “insufficient to track fossil fuel asset sales” by the supermajors, the report by Columbia’s Sabin Center for Climate Change Law said.
The Columbia researchers analyzed 76 transfers between 2017 and 2021 – full divestitures of oil-producing assets – by seven companies: BP, Chevron, ConocoPhillips, Eni, ExxonMobil, TotalEnergies and Shell.
ExxonMobil, TotalEnergies and Shell had the most transactions, with ExxonMobil conducting 17 and TotalEnergies and Shell conducting 15 transactions each. Chevron had 12 transactions, ConocoPhillips nine, BP conducted five, and Eni conducted three.
“Sales of upstream fossil fuel assets are common and have led to the offloading of significant greenhouse gas emissions by the supermajors,” the report said.
On average, scope 3 emissions from sold assets made up approximately 25 percent of their total corporate scope 3 emissions over these five years. Scope 3 emissions include all the downstream emissions, such as those from burning the fossil fuels produced by a company.
Looking at just the emissions from oil and gas production – scope 1 – Shell sold assets with the most emissions – 13.2 million tons carbon dioxide equivalent (Mt CO2e). Eni, the Italian oil company, the sold assets that had 0.1 Mt CO2e in emissions
“The remaining supermajors’ sold assets accounted for production ranging from 100 million to 325 million BOE [barrel of oil equivalent] and emissions ranging from 3.2 to 8.6 Mt CO2e,” the report said. “This emissions range represents between 6 percent and 16 percent of these companies’ average annual scope 1 emissions.”
While the supermajors are lightening their greenhouse gas emission, the transfers can lead to increased emissions.
“Fossil fuel assets sold by the supermajors may move to companies with worse track records in environmental and other matters,” the study said.
Analyzing the emissions intensity of a sample of sold assets before and after the asset transfer, the Columbia researchers found “on average, sold assets demonstrated higher post-sale emissions intensities, which indicates that they operated less efficiently.”
One example the researchers offered was French supermajor TotalEnergies’ 2021 sale of its Petrocedeño S.A. to a subsidiary of Venezuela’s state-owned oil company.
TotalEnergies said the sale was prompted by the fact that it “does not intend to allocate any further CapEx [capital expenditures] to some hydrocarbons, which clearly cannot fit with low-cost, low-emissions oil projects.”
The sale was disclosed among the “climate-related risks and opportunities” as part of TotalEnergies’ risk mitigation and resilience strategies. The company gave almost no details about the sale’s environmental impact.
TotalEnergies received a symbolic payment and “a broad indemnity in relation to the past and future participation of TotalEnergies in Petrocedeño.” TotalEnergies took a $1.38 billion loss from the transaction.
“The sheer scale of the supermajors also frustrates third-party analysis,” the report said. “While some jurisdictions specifically require companies to disclose certain large asset sales through real-time supplemental reporting, the most prominent oil and gas companies are so large that even multi-billion-dollar sales may not trigger these heightened disclosure requirements.”
The report called for improving current reporting regimes and increase transparency on asset sales.
