Oil Giants Sell Dirty Wells to Buyers With Looser Climate Goals, Study Finds

When Shell sold off its stake in the Umuechem oil field in Nigeria last year, it was seen as a step forward in the company's climate ambitions.

As soon as Shell left, the oil field underwent a change so significant it was detected from space: a surge in flaring or wasteful burning of excess gas in towering columns of smoke and fire. Flaring emits greenhouse gases and soot into the atmosphere.

Many of the world's largest energy companies are expected to sell off more than $100 billion of oil fields and other polluting assets in order to cut emissions and make progress toward their corporate climate goals. They frequently sell to buyers who don't know much about their operations, have not made any pledges to combat climate change, and are committed to ramping up fossil fuel production.

More than twice as many oil and gas deals were involved in moving assets from operators with net-zero commitments to those that didn't, than the reverse, according to new research to be released Tuesday. Concerns are being raised that the assets will continue to be polluted, even at a greater rate, but away from the public eye.

You can move your assets to another company, but that doesn't mean you will have a positive impact on the planet.

Transactions like these expose the messy underside of the global energy transition away from fossil fuels, a shift that is imperative to avoid the most catastrophic effects of climate change.

Satellites had not spotted any flaring from the field for four years before the sale of Umuechem in Nigeria. According to data from the VIIRS satellite, the operator with no stated net zero goals increased flaring after they sold the field. Last year, Trans-Niger said it would triple production.

State-owned oil and gas corporations such as Indonesia's Pertamina and China's CNOOC have been among the top buyers in recent years.

Some of the other top buyers were less well-known. In a sign of the difficulty of tracking these transactions, the acquirers in many other deals weren't known. The study showed that the number of transactions that took fossil-fuel assets from public to private ownership comprised the largest share of deals.

Shell said it looked forward to seeing the full report. As it seeks to reach net zero emissions, the Dutch company has said that divestments are a key part of their efforts.

Marilia Cioni said that asset sales were not considered a tool to reduce emissions. Total and Trans-Niger Oil and Gas didn't respond to questions on Monday.

The transfer of emissions that drive climate change from one company to another is making it difficult to clean up fossil fuel infrastructure.

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Apache, which had been struggling with its operations in Texas's vast Permian Basin, sold about 2,100 wells to a little-known Louisiana operating company, Slant Energy.

40 percent of the wells were inactive. Before Apache sold the lot, the Houston-based company had been plugging an average of 169 wells a year to prevent them from leaking toxic chemicals into the ground or from emitting methane, a potent greenhouse gas. Apache could finish plugging the inactive wells in nine years.

Slant has only plugged two wells since taking over. It would take 120 years to plug all of the inactive wells.

According to the Environmental Protection Agency, each inactive, unplugged well causes greenhouse gas emissions equivalent to between 17,000 and 50,000 miles driven by an average gasoline-powered passenger vehicle. According to industry estimates, there are 1.6 million unplugged wells in the United States.

Sean P. Gill said the numbers from the company did not seem to be accurate. Slant took over those wells recently and continues to evaluate the economic development of the assets in a responsible way.

Apache said that it wasn't valid to assume that a company would have the same schedule for plugging their wells.

Global banking corporations that play a critical role in facilitating coal, oil and gas mergers, acquisitions and other transactions are under renewed scrutiny because of the concerns raised by emissions that are transferred to different companies. Direct financing of fossil fuel projects has been the focus of the climate campaign. The recent examples show that the business of mergers and acquisitions can have climate consequences.

Shell, a publicly-traded company, said that it discloses emissions from both its operations and the oil and gas that it produces, has corporate targets for reducing greenhouse gas emissions, and has committed to zero flaring across its operations. Targets and commitments can fall away when it sells an oil or gas field.

The new owners of the Umuechem project said they will focus on rapidly ramping up production, which can strain the oil field's facilities and require significant amounts of flaring. The field's ability to collect the additional gas is overwhelmed by rapidly increasing oil production.

As major oil and gas producers sell more fossil fuel assets, they need to enter into contracts with buyers that commit them to similar disclosures and emissions reduction targets. In the case of oil and gas wells and other assets that are nearing the end of their lives, they argue that corporations shouldn't be allowed to hand off responsibilities to operators that don't have the resources to invest in the clean up work.

One solution would be for auditors or regulators to start scrutinizing every sale, and challenge a transaction if targets or environmental obligations aren't accounted for.

Prof. Hipple said that Diversified, an operator listed in London, has become the largest owner of oil and gas wells in the United States by buying up aging wells. It has been said that the wells will be productive through 2095, which will allow it to delay its clean up costs for decades.

The business model of Diversified takes overlooked or neglected assets, improves environmental performance, and retires them. The goal was to achieve net-zero emissions in the year 2040.