COP28 concluded with big promises this week, but the level of investment needed on behalf of the global energy industry to meet the summit’s ambitious climate mitigation goals remains a far stretch from what is being invested today. Energy sector M&A is on track for a record quarter, driven by megadeals that will consolidate big oil’s hold on some of the most valuable fossil fuel resources in the world. Financing for new energy projects at the world’s largest banks actually shifted toward a greater emphasis on oil and gas development. Elevated energy prices and heightened profitability among oil majors has managed to keep capital flowing toward fossil fuels, depriving renewables of the many billions of Dollars needed to cut global emissions to net zero by 2050.
Related ETFs: Invesco DB Oil Fund (DBO), Energy Select Sector SPDR Fund (XLE), SPDR S&P Oil & Gas Exploration & Production ETF (XOP), iShares Global Clean Energy ETF (ICLN)
At the 28th Conference of the Parties – known more commonly as COP28 – new progress was made toward the allocation of hundreds of billions of Dollars in commitments meant to finance climate mitigation measures. These investments, along with even more set to be announced at next year’s conference, are meant to limit global warming to 1.5°C above preindustrial levels and push global emissions toward an explicit net zero target by 2050. Though the summit was held in the oil and gas stronghold of the UAE, conference attendees, which included governmental representatives from the US, UK, France, India, Brazil, the EU, and more, struck a deal that makes an unprecedented call for “transitioning away from fossil fuels.”
However, as the world’s largest climate conference transpired, the oil and gas industry was continuing a massive consolidation drive in the background. Bloomberg data indicates that the fourth quarter of 2023 has been the most lucrative ever for energy sector M&A, with a total of 227 deals valued at $163.1 billion being announced. This sum has been largely driven by blockbuster purchases of US-based shale resources. Exxon Mobil disclosed a $59.5 billion deal to acquire Pioneer Natural Resources in October, just days before Chevron would announce a $53.0 billion acquisition of Hess Corp. This past Monday, Occidental Petroleum Corp. picked up oil driller CrownRock for $12.0 billion.
Per Wood Mackenzie, the total value of deals focused on the US Permian shale basin alone have surpassed $100 billion so far this year. Exxon’s Pioneer purchase will more than double…
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