“Yes, we finally unloaded that piece of crap in Denmark we’ve been trying to sell for decades,” Shell’s Steve Lesher told California lobbyist Gavin McHugh last spring. “I wouldn’t put that in this GHG-sensitivity category. That was just a crappy facility.”
This exchange appears in a trove of emails and other materials recently made public by a House Oversight Committee investigation into oil industry greenwashing. And the “piece of crap in Denmark” Lesher refers to was probably a refinery in Fredericia owned by Shell’s Danish subsidiary, which was sold to Postlane Partners, a Connecticut-based private equity firm, in early 2021.
“GHG” stands for greenhouse gas, and Lesher’s email indicates he didn’t think selling the refinery would make the company more climate-friendly. But the company’s press release on the matter had a decidedly greener spin: “This exit supports our ambition to be a net-zero emissions energy business by 2050 or sooner, in step with society.”
Lesher’s email offers a window into one way multinational oil companies are trying to present themselves as engines of emissions reduction. Under pressure to cut greenhouse gases in line with “net-zero” targets and maintain their social license to operate—something Shell executives fret openly about in private emails—these companies have come up with a neat trick for making themselves look more climate-friendly: selling their worst-offending properties off to someone else.
Lesher’s email, sent in May, also mentioned another sale: Shell’s Deer Park refinery in Houston. That sale, Lesher wrote, is “further evidence that the company is divesting of most of the really energy intensive emitters.” As evidence, he named five other assets Shell purged from its books in the two years earlier. Particularly climate-friendly was Shell’s prior unloading of its Canadian oil sands business, “a big greenhouse gas headache with a lot of NGO opposition.”
“No one in the company has said this,” he continued, “but the pattern is pretty clear: if you’re a major greenhouse gas emitter, and particularly if you operate in a GHG-sensitive area like [California, Washington] or [Canada], your days in the Shell family are probably numbered.”
What happens to those facilities, though? Those emissions don’t just disappear. Often, they change hands to far less accountable and high-profile companies, usually private equity firms or smaller, privately held drillers, which are content to keep on spewing carbon, methane, and other pollutants into the atmosphere and surrounding communities.
In some cases, Shell is perfectly content to keep polluting. “The other pattern to notice,” Lesher wrote, “is where we DO own high GHG intensive things, it’s in areas where they aren’t that politically sensitive about such matters: China, Singapore, Malaysia, Louisiana.” In other words, the places where they can get away with it.
Deer Park, which Shell sold to the Mexican state-owned oil company Pemex in January, illustrates how the strategy of selling off assets, at best, simply shifts blame. The refinery continues to process the Mexican heavy crude oil it has for years. “Under Mexican ownership the refinery will continue its practice of using Mexican crude oil, but it will probably sell more of the gasoline and other fuels it produces to Mexico,” The New York Times reported. Pemex processed about 20 percent more crude there in the second quarter of 2022 than it did under its previous owners last year. Whatever ends up happening at Deer Park moving forward, it won’t be Shell’s problem anymore.
Sometimes, selling off assets means more emissions. In 2017, Shell sold all of its onshore oil and gas operations in Gabon—including five operational oil fields, a pipeline network, and an export terminal—to a portfolio company of the private equity firm Carlyle Group called Assala Energy, for $628 million. While production had been declining in the years leading up to the sale, Assala invested heavily to reverse that after it acquired Shell’s Gabon properties, and has since doubled production in the expansive Rabi oil field.
Carlyle and other private equity firms have been snapping up assets that oil companies no longer want, either because they’re bad investments, bad for the climate, or both. The Private Equity Stakeholder Group has found that the industry has invested $1.1 trillion into the energy sector since 2010, most of that going to fossil fuels. A new report from the group released last week week found that 76 percent of Carlyle’s energy portfolio is invested in fossil fuels and that in 2020 its portfolio was responsible for 10.8 million metric tons of carbon dioxide in the United States alone. The firm has recently argued that its expertise and capital positioned it to transform energy companies to be green.
These transactions and their afterlives can be difficult to track for a number of reasons. Since they’re not publicly traded, the private equity firms and smaller drillers that tend to buy up assets that Shell and other large companies offload aren’t obligated to provide much transparency to the public or regulators about what they do with them afterward. They’re also often run by even less identifiable subsidiaries. Earlier this month, Shell and Exxon sold their joint stake in the California-based driller Aera Energy—including some 13,000 wells in the San Joaquin Valley—to Green Gate Resources, a subsidiary of the German asset manager IKAV. IKAV acquired BP’s natural gas business in Colorado two years ago, with the same mission to buy “assets with strong cash yields” and hold them “to maximize returns to its funds,” according to the IKAV website.
In places where there’s more regulatory pressure and news coverage, those acquisitions can look a bit cleaner. Crossbridge Energy—the Postlane Partners affiliate now running the Fredericia refinery—plans to make the site “carbon neutral” by 2035 and eventually produce biofuels and green hydrogen. This summer, it entered a partnership to get 300 megawatts of green hydrogen from the company Everfuel for greening its operations; a facility now under construction on the site is slated to start supplying the Crossbridge refinery with a modest 20 MW of green hydrogen by the end of the year. Eighty percent of the hydrogen is due to be used for oil refining operations, with 20 percent devoted to green transportation fuels. For now, though, its production remains mostly conventional, accounting for about 35 percent of Denmark’s liquid fuels.
But overall, selling off polluting assets tends not to do much for the planet. A 2021 Bloomberg investigation found that BP reported a 16 percent drop in operational emissions after it sold off its Alaskan business to the little-known Texas firm Hilcorp for $5.6 billion. Production on those same assets climbed 5 percent over the year before the sale, increasing emissions by an amount equivalent to putting 108,000 new cars on the road. A study published this spring from the Environmental Defense Fund found a dramatic spike in flaring at a Nigerian oil field after Shell, Total, and Eni sold off their holdings in the country. According to the same study, ExxonMobil, BP, Shell, Total, Eni, Chevron, ConocoPhillips, and Equinor are expected to sell off $111 billion worth of assets in the coming years.
Private acquisitions are only growing. The practice has always looked cynical from the outside. Going by the contents of Lesher’s recently released email, it looks pretty cynical from the inside too.
