Rajat Kapoor, Managing Director and Head of Synergy’s Oil Gas and Petrochemicals practice at Synergy Consulting, Inc., shares his views on Private Equity’s Shifting Bet: Why O&G Assets Are Back in Vogue.
Over the last 18 months, private equity (PE) has dramatically re embraced oil & gas assets. And this is a significant change in course for the Cap Stack Cowboys, if not a full 180 degree turn – what had once been sidelined in favor of renewables is now firmly back at the table. The reason? A confluence of strategic divestitures, powerful macro themes, and patient capital seeking stability and yield.
According to S&P Global, PE investment in fossil fuels surged from $6.61 b to $15.31 b in 2024, marking a staggering 131% year on year increase. Notably, the second half of 2024 alone saw over $10.17 b funnelled into oil and gas assets, far surpassing the $5.14 b invested in renewables during the same period, this at a time when the world was battling the twin pressures of a geo-politically volatile world and grappling with demand uncertainty from key Asian economies of China and India.
Big oil’s strategic pivot away from non-core assets—driven by capital discipline—has opened the door for PE liquidity. As big oil continues to streamline portfolios, there will be opportunities for private players with a strategic intent to pick up a piece! These deals provide PE with discounted entry points and operational upside.
Strategic Drivers: AI, Energy Security, and Yield
A pivotal factor: data center power demand. Generative AI developments are amplifying energy needs—datacenters alone could consume 8% of U.S. power by 2030, up from 3% in 2022 . That energy cannot reliably come solely from weather-dependent renewables, reviving interest in gas and oil.
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