Navigating the energy transition: International oil company divestments and the stranded asset dilemma in Africa

Abstract

The global energy transition is accelerating the risk of stranded fossil fuel assets, posing significant economic and environmental challenges for resource-dependent countries. This paper critically examines the divestment strategies of International Oil Companies (IOCs) across five major African oil-producing countries (Nigeria, Angola, Gabon, Ghana, and Algeria) and analyzes how these transitions shape new patterns of asset stranding and governance vulnerability. The study provides an integrated evaluation of divestment impacts through a comparative analysis of regulatory frameworks and environmental governance capacities with scenario-based modelling. It finds that IOCs’ proactive divestments act as strategic risk mitigation mechanisms, enabling companies to minimize future stranded asset exposures while transferring substantial environmental, financial, and operational risks to host governments, local operators, and communities. Weak regulatory enforcement, fragmented institutional oversight, and opaque decommissioning frameworks exacerbate these risks, especially in countries with limited environmental governance capacities. Scenario modelling suggests a high probability of negative post-divestment trajectories unless urgent policy interventions are implemented. The study emphasizes the importance of enforceable decommissioning obligations, transparent divestment agreements, and enhanced environmental governance to effectively manage externalized risks. By distinguishing actor-specific challenges and offering a conceptual framework of stranded asset pathways, this paper contributes to advancing policy debates on sustainable asset transition management in the Global South.