Global oil and natural gas operators could be pushed to sell or trade $100 billion-plus in assets because of the energy transition to alternative fuels, but it’s likely the U.S. portfolios would be off the table, according to a new analysis.

Rystad Energy did a deep dive on the geographical spread of some of the largest operators generally defined as majors for its study, using BP plc, Chevron Corp., ConocoPhillips, Eni SpA, Equinor SA, ExxonMobil, Royal Dutch Shell plc and Total SE.

As many companies in the energy field and beyond look to achieve net-zero emissions within 30 years, the eight exploration and production (E&P) giants “may need to divest combined resources of up to 68 billion boe, with an estimated value of $111 billion and spending commitments in 2021 totaling $20 billion,” analysts said.

“The global energy market is on the brink of a major transition to cleaner sources of energy. To adjust and transform, the world’s largest oil and gas firms are revising their long-term oil price and demand outlook, and need to streamline their portfolios significantly to improve cash flow, cost efficiency and competitiveness. As a result, several billions of dollars in assets are about to change hands.”

The key criteria used to determine whether one of the operators would benefit from staying in a country were: cash flow over the next five years; potential growth in the current portfolio; and its presence in key E&P growth countries toward 2030. 

“Based on this, we see that the majors-plus may seek to exit 203 country positions and as a result reduce their number of country positions from 293 to 90,” analysts said.

“Companies will look to expand in the prioritized countries through exploration, acquisitions or asset swaps with other major-plus players,” said Rystad’s Tore Guldbrandsoy, senior vice president. 

“However, to stay in a country that our criteria exclude, a company may instead seek to grow its local business more aggressively to make sure the portfolio will have a positive and more significant impact on overall performance.”

Based on Rystad’s criteria, the E&Ps altogether “need to exit 203 country positions in 60 countries. The remaining countries after the screening vary from six to 16 countries per company.”

Keeping U.S., Canada, Australia

All the E&Ps studied “are likely to keep a presence in the U.S., and most of them may also remain in Australia and Canada.” However, “we see quite a few countries with only one oil major present, including Argentina (BP), Ghana (Eni), Thailand (Chevron) and Guyana (ExxonMobil),” analysts said.

“In some of these countries it could be tempting for others to stay or increase their presence as the competition may be more limited. At the same time, these countries could also be growth targets for other companies than the majors-plus.”

Several potential deals are seen as players make trades to boost their positions in a key country.

“For example, BP, Eni and ConocoPhillips could consider acquiring the Indonesian portfolios of ExxonMobil, Total and Shell,” analysts said. Likewise, Shell’s and Total’s portfolios “could be of interest to BP” if the UK-based company wanted to enlarge its Indonesia liquefied natural gas (LNG) asset base or add a growth asset.

Some of the majors already are putting assets up for sale. ExxonMobil is “planning several country exits including the UK, Romania and Indonesia, and Shell…was trying to exit a key LNG asset in Indonesia in 2019.

“This shows that the majors-plus are well aware of the need to focus their portfolios to improve cash flow, efficiency and competitiveness as the energy transition accelerates — but so far, the steps may be too small,” according to Rystad.

Cash available for acquisitions could be limited in the current market, while volatile prices may make it difficult for sellers and buyers to agree on valuations.

“We also expect that the majors-plus will divest assets with high emission intensity to meet long-term targets for reducing emissions,” said analysts.