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Rising low-carbon investment by oil and gas companies has been
highlighted by increased M&A activity within this segment.
Accordingly, oil and gas companies were involved in a record-high
number of low-carbon transactions in 2019, with 33 acquisitions,
direct investments, and joint venture formations, up from 20 in
2018 and 11 in 2017. On the basis of total transaction value (for
those deals with a disclosed value), low-carbon M&A deal value
by these companies amounted to $1.2 billion in 2019, down from $4.3
billion in 2018, amid fewer large-scale deals (with only two
transactions over $100 million during the year).
Figure 1: M&A activity in the low-carbon segment by oil and
gas companies, by segment
Over the past decade, solar generation (with activity across an
array of companies) and biofuels (led by BP) have seen the most
M&A activity from oil and gas companies, with 17 and 15 deals,
respectively, since the start of 2010. Activity has also shifted
more recently toward the mobility and offshore wind generation
segments. On a regional basis, Europe has seen the largest share of
this activity, accounting for 55% of transactions since the start
of 2010, followed by North America. From a company perspective, the
Europe-based global integrated oil companies (GIOCs) have been the
most active in terms of M&A activity within the low-carbon
segment, led by Total and Shell. However, activity has become
increasingly broad-based of late, with M&A activity spanning US
independents, international E&Ps, national oil companies
(NOCs), and the service sector.
Figure 2: Oil & Gas corporate venture investment
activity
A similar trend has emerged within the venture capital space,
with rising low-carbon venture investment activity by oil and gas
companies. Similar to M&A, venture capital provides a mechanism
for investing in emerging technologies and companies, motivated by
strategic value, where the technology can be deployed in the
organization to enable a firm's strategic objectives. Whereas these
companies' venture activity was traditionally focused on emerging
technologies with applications for the core oil and gas business,
the low-carbon segment has comprised the majority of their venture
investment transactions in recent years. In addition, shifts in
corporate venture strategies—including implementing greater
alignment between venture investment activity and emerging
low-carbon business opportunities, and the establishment of
low-carbon venture teams— point to efforts by these companies
to leverage venture investment units as part of their positioning
for the energy transition.
