Private Eyes Wide Shut: Private Equity Investments in Oil and Gas at Risk from Energy Transition

It is increasingly clear that the energy transition is well underway, with renewables substituting for oil. Projections for oil and gas demand present a bleak picture for the industry: the International Energy Agency (IEA) now foresees global demand for oil, gas, and coal all peaking by the end of this decade. This seismic shift in energy consumption will have significant consequences for energy investors, across all asset classes. This report is primarily written for private equity investors – both General Partners (GPs) and Limited Partners (LPs) – and highlights the unique risks which they face from continued investment in Upstream, alongside those facing listed equity investors. It builds on existing Carbon Tracker methodologies and analysis to better equip private equity investors with the tools to evaluate the viability of their investments. Furthermore the report uses the UK and Norway’s North Sea territories, a recent hotbed of private equity activity, to present a case study of how these risks could materialise for 10 private equity backed companies in the basin. It finishes by identifying the key considerations for policymakers and financial regulators by throwing a spotlight on private equity backed companies’ role in new licensing.