Written with Reabold in mind too!17 May 2025 12:22
UK oil and gas firms face hidden risks in net zero transition
16 May 2025
Business and economy Energy Environment Research Sustainability
A UK oil rig
Smaller companies with ageing North Sea assets were especially vulnerable to financial losses, researchers found.
A new study has revealed that many UK oil and gas companies are underestimating the financial risks posed by the transition to net zero, potentially leading to overvalued company accounts and exposing investors to significant losses.
Led by academics from the UK and France, and based on company reports and 22 in-depth interviews with industry insiders, the study’s aim was to explore how well transition risks were being accounted for.
It found that the net zero shift was likely to reduce access to capital for fossil fuel companies, push up borrowing costs, and trigger large-scale write-downs – leading to some assets being stranded.
“These pressures could have put the future viability of some companies in question,” said Dr Freeman Owusu, of Loughborough University Business School.
"Our findings show that the transition to net zero presents significant risks for oil and gas companies in the UK.
“These risks include rising operational costs, reduced access to finance, and increased financial pressure.
“Together, these risks threaten the going concern of some oil and gas companies, lower market value, and have knock-on effects on the wider energy supply chain and government revenues.”
Smaller firms with high emissions and fewer alternative business streams were seen as most exposed.
The research pointed to two urgent issues: the financial risks tied to the energy transition, and the need for clearer, more tailored company disclosures.
While existing reporting frameworks—such as the TCFD, CDP, ISSB, and TPT—offer guidance on climate risks, sustainability performance, and transition readiness, the study found they often do not fully capture the unique financial and accounting risks that oil and gas firms face in moving towards net zero.
Participants called for greater transparency around ESG performance (how well a company manages its environmental, social, and governance), remaining reserves, plans for asset write-downs, and how business models were evolving.
Without this, the study suggested, companies risked losing stakeholder trust and weakening their long-term prospects.
Dr Owusu said: “What is particularly concerning is the lack of transparency. Our research highlights a disconnect between the magnitude of these risks and the level of disclosure currently provided by oil and gas companies.
“We argue that more detailed and forward-looking disclosures are urgently needed not only to meet stakeholder expectations but to allow for informed investment and policy decisions.
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