Shell’s decision to leave Permian Basin unlikely to impact Texas workforce or climate issues, experts say

Oil and gas drilling in the Permian Basin in West Texas in 2018.

Midland Mayor Patrick Payton expects most people working for Royal Dutch Shell in West Texas to keep their jobs after the energy giant sold its oil and gas business in the Permian Basin to ConocoPhillips for $9.5 billion cash on Monday.

Instead, Payton said, many of Shell’s oil and gas workers will likely do similar jobs for ConocoPhillips, the Houston-based company that appears to be going all-in on oil and gas in West Texas. With the sale, Conoco now owns land in the oil patch comparable to the largest players there.

For Shell, the motivation for the sale was to meet the company’s goals of shrinking its carbon dioxide emissions and increasing its share of renewable energy sources, objectives made legally binding by a Dutch court this summer. The company has faced pressure to reduce its oil and gas production and produce more clean energy in response to concerns from investors and the public about climate change.

But despite Shell’s climate goals, energy experts said the deal, which moves more than 175,000 barrels per day in production from one major company to another, isn’t a signal that the industry is focusing more on protecting the environment.

“You’re not reducing emissions, you’re just transferring who produces them,” said Arvind Ravikumar, who leads the University of Texas at Austin’s Sustainable Energy Transitions Lab.

“This is not a symbol of global movement to take climate action,” said Kenneth B. Medlock III, senior director at the Center for Energy Studies at Rice University. “This is a symbol of what two different entities viewed was in their own commercial best interest.”

Luke Metzger, executive director of Environment Texas, said the deal highlighted “that the Permian Basin has gained a notorious reputation — many Wall Street people have said it has a black eye for failing to address methane emissions and flaring.”

While he was encouraged by Shell’s announcement, more would be needed from major companies in order to “take the oil industry seriously about their climate commitments,” Metzger said, adding that ConocoPhillips’ move to increase its investment in fossil fuels is “a step in the wrong direction.”

For the Texas fossil fuel industry, the deal was welcome news.

“[Shell’s] assets transferring to a company that wants to be in the oil and gas business in the state of Texas and that’s headquartered in Texas — it’s hard from my standpoint to find a negative on balance from the announcement of this transaction,” said Karr Ingham, economist for the Texas Alliance of Energy Producers.

Todd Staples, president of the Texas Oil and Gas Association, said the deal “is a sign that Texas will continue to be the center of oil and gas development.”

Payton, the Midland mayor, wants companies operating in the region that want to be there.

“It’s a discouraging move when multinationals like Shell pull out of the world’s most secure oil and gas region for reasons most dominated by activist shareholders,” Payton said. “But I’m encouraged by the fact that an organization like Conoco completely sees the benefit of being here.”

Disclosure: Rice University, the Texas Alliance of Energy Producers, the Texas Oil and Gas Association, and the University of Texas at Austin have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

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