Sumitomo finalizes its exit from shale oil with the sale of US assets
TOKYO – Japanese trading house Sumitomo Corp. gave up the last of its shale development interests with the sale of the oil operations in Texas, as the arrival of a more climate-conscious White House darkens the outlook for fossil fuels.
The group sold its oil production assets in the Eagle Ford Shale formation to a U.S. oil company in a deal valued at tens of millions of dollars. This follows the September sale of Sumitomo’s roughly 30% stake in a shale gas project in Marcellus Shale in Pennsylvania.
Sumitomo and other Japanese trading houses had invested heavily in shale since 2005, when the American revolution in this area was fully underway. But many of the best sites were owned by local developers, and Japanese gamers struggled to make a profit. Itochu withdrew from shale development in 2015.
The former US administration under President Donald Trump supported the shale industry by relaxing drilling restrictions and pushing pipeline projects forward.
But President Joe Biden, who has made environmental issues and climate action a priority, is going in the opposite direction. Shortly after taking office, he signed executive orders suspending new drilling on federally owned land and revoking a Presidential license for the Keystone XL pipeline.
American businesses are also affected by this change. ExxonMobil on Tuesday announced a net loss of $ 20 billion for the three months to December, in part due to the write-offs related to the US shale.
Sumitomo is forecasting a record net loss for the group of 150 billion yen ($ 1.42 billion) for the fiscal year ending March, in part due to a collapse in its core steel pipe business. Its resources, energy and chemicals segment accounts for about 20% of net profit, a lower share than other trading houses as the company moved quickly to get rid of unprofitable interests in resources.
Sumitomo has already solidified its plans to end investments in new oil development projects.
Not all trading houses avoid shale. Mitsubishi Corp. focuses on a project to produce and sell liquefied natural gas from American shale.