Shell plans to withdraw from California joint venture with ExxonMobil

According to Reuters on July 2, four people familiar with the matter told Reuters that Royal Dutch Shell plans to leave its California oil and gas production joint venture Aera with ExxonMobil.

Shell has divested a large number of carbon-intensive assets this year, sold its Washington State refinery to Holly Frontier Corp, and sold its shares in the Houston area refining joint venture to Petroleos Mexicanos. Because Shell is shifting new investments to renewable energy and power.

According to a previous report by Reuters, the company is also considering selling its assets in the Permian Basin in Texas.

Aera produces approximately 125,000 barrels of oil and 32 million cubic feet of natural gas per day, accounting for approximately 25% of the state’s oil and gas production.

According to people familiar with the matter, Shell has notified Exxon Mobil of its plan to withdraw from the joint venture. Since the negotiations were conducted in private, the person familiar with the matter requested anonymity. A Shell spokesperson declined to comment on the grounds of company policy.

The joint venture is headquartered in Bakersfield, California, and mainly produces in the San Joaquin Valley. Shell previously sold all of its refining operations in California, some of which have pipeline connections to oil fields.

Although California has implemented the most stringent state-level regulations on greenhouse gas emissions, the state’s daily oil production is still about 360,000 barrels. Last year, an executive order required that by 2035, all new cars and passenger trucks sold in California must be zero-emission vehicles and reduce the dirtiest form of oil extraction.

With the lifting of travel restrictions during the pandemic, demand rebounded, and oil prices have soared this year by more than 50%. Rising oil prices have prompted many oil producers to list their assets for sale. Investors demanded to reduce investment in fossil fuels to curb the pressure of global climate change brought about by carbon emissions, which intensified the selling craze.

Shell and other European oil producers, such as BP and Total Energy, have pledged to reduce emissions by increasing investment in renewable energy, while reducing their holdings of some oil and gas assets.

Shell is one of the largest oil companies in the world. The company said this year that its goal is to reduce the carbon intensity of its products by at least 45% by 2035 and 100% from 2016 levels by 2050. A Dutch court ruled that Shell’s efforts were insufficient and ordered it to reduce emissions by 45% from 2019 levels by 2030.

There may be more transactions happening this year. Chevron hopes to divest approximately $1 billion in assets in the Permian Basin in Texas and New Mexico. According to industry experts, Exxon, Occidental Petroleum and other oil companies are seeking to divest unneeded assets to raise cash.