Asset disposals are commonplace in the oil and gas industry, and M&A has long been a feature of the industry.
Yet, as the energy transition continues to gather pace, there is a growing risk that assets are transferred to companies which have lower operational standards and reduced financial ability to pay to. Where such transfers are in response to pressures to reduce emissions, they may actually result in higher emissions.
Accordingly, we have developed a set of Responsible Exit Principles for Oil and Gas Companies for use by a range of stakeholders. They define a set of credible, widely recognised best practice standards governing the operation and eventual closure of such assets, by informing how sellers, buyers and their financial stakeholders can mitigate financial, environmental, governance and reputational risks related to such transfers.
- Corporates should consider these guidelines as supporting M&A activity – from both buyer and seller perspectives – to reduce exposure to regulatory, litigation and reputational risks.
- Financial institutions should refer to these when determining whether and under what conditions to lend to, invest in, underwrite, advise or insure a company in the oil and gas sector
- Financial regulators can use these principles to consider how best to regulate decommissioning activities and asset transfers, including in relation to Nationally Determined Contributions (NDCs) and fiscal policy.
The Principles launched at New York Climate Week 2024.
Acknowledgements
These Principles have been prepared by Mike Coffin on behalf of Carbon Tracker Initiative, Nicola Woodroffe and Erica Westenberg on behalf of the Natural Resource Governance Institute, and Karina Litvack. They have benefited from consultation with over 100 stakeholders from the oil and gas industry, investors, the financial, legal and accounting professions, the insurance industry, standard-setting bodies, academia and civil society. We thank them for their time and inputs.
