Carlyle’s fossil fuel portfolio remains expansive, despite failure of its newest upstream acquisition endeavor
June 11, 2025
Over the past 10 years, the American diversified private equity firm, The Carlyle Group, has been active in energy acquisitions and investments. While the firm continues to maintain an expansive portfolio of fossil fuel assets, new energy deals for the firm have been slowing down, and its latest $945 million upstream acquisition endeavor has failed. The deal involved the acquisition of a portfolio of Energean’s upstream operations in Italy, Egypt, and Croatia. Energean CEO, Mathios Rigas, blamed the acquisition failure on Carlyle’s inability to obtain the necessary approvals in both Egypt and Italy, Reuters reported.
It is not yet clear whether the failed Energean deal will have negative impacts on limited partners. Without responsible investments of the funds, private equity firms are unable to increase returns; large deal failures can also increase reputational risk and potentially harm future fundraising efforts. With the announcement of a new flagship fund in 2025, it remains to be seen if energy will be a core strategy of the fund or if Carlyle will face similar fundraising challenges as it did with its 2023 fundraising failures.
Carlyle’s Energy Dealings
Carlyle and its subsidiary NGP backed at least 114 fossil fuel assets globally and 31 energy companies as of April 2025, according to the Private Equity Climate Risks Global Energy Tracker. Of the assets included in the Energy Tracker, 77 percent of the firm’s fossil fuel assets operate outside the United States, with 61 operating in France and Germany through Carlyle’s investment in global midstream company, Varo Energy. In the 2024 Private Equity Climate Risks Scorecard, Carlyle earned a D and was ranked the third-worst offender of the 21 private equity firms profiled.
Carlyle’s energy portfolio includes upstream oil and gas drilling operations, midstream pipeline and storage facilities, and downstream gas-fired power plants. 77 percent of the assets were midstream, 24 percent upstream, and only 1.8 percent downstream. For over a decade, Carlyle maintained an extensive downstream portfolio, but in August 2024, rather than responsibly transitioning the high-emitting downstream assets, Carlyle offloaded its largest portfolio of gas-fired power plants, operated by Cogentrix, to private equity energy specialist firm Quantum Energy for $3 billion. Cogentrix Energy Management had been a portfolio company of Carlyle’s since 2012. According to a 2023 analysis of Carlyle’s energy portfolio and its impact, the firm operated 19 downstream assets (all through Cogentrix), which were responsible for 83 percent of its total downstream emissions from 2011-2021, at least 63 million metric tons of CO2e. This figure is equivalent to the greenhouse gas emissions of 14 million gasoline-powered cars driven for one year.[1]
Carlyle’s energy deals have been inconsistent over the past decade. In an analysis of Carlyle’s energy deals of data available from Pitchbook[2], the firm has spent at least $34 billion[3] over an estimated 144 energy deals since 2015, with a peak of 19 deals in 2017. Deal activity has been trending downwards since 2021, and Carlyle has averaged about 10 energy deals a year since then.
See chart here.
The downward trend in energy deals coincides with increasing scrutiny of Carlyle’s fossil fuel investments, which were highlighted by The New York Times in October 2021, citing PESP’s report, Private Equity Propels the Climate Crisis. The firm received an F on the 2022 Private Equity Climate Risks Scorecard, which was profiled in The Guardian. An April 2023 analysis of Carlyle’s Hidden Climate Impact revealed that the firm’s 2011-2022 carbon footprint was an estimated 277 million metric tons of carbon dioxide equivalent, roughly the same as the “carbon bomb” Willow drilling project in Alaska. Though Carlyle earned a slightly higher score in the 2024 Private Equity Climate Risks Scorecard, a D, the firm was still ranked the third-worst offender of the 21 private equity firms profiled.
Mediterranean Deal Collapses Amid Energy Uncertainty in the Region
In June 2024, Carlyle announced it was building a new upstream company in the Mediterranean through the acquisition of existing gas-weighted exploration and production assets from Energean. Carlyle stated the endeavor would deliver highly strategic assets across Italy, Egypt, and Croatia, with expected production equivalent to 47,000 barrels of oil per day. Tony Hayward, ex-CEO of BP and Executive Chairman of Carlyle portfolio company, SierraCol, was installed as Chairman of the new Mediterranean company with the goal of scaling its operations.
On March 17, 2025, Reutersreported the deal was at risk of collapsing, and on March 21st, Energean announced termination of the transaction.
Energean CEO Mathios Rigas stated that Carlyle had initiated the $945 million deal and expressed disappointment with the firm for its failure. Rigas stated, “While I am disappointed that Carlyle was unable to obtain the necessary approvals in Italy and Egypt, I want to reaffirm that this outcome does not change our strategic direction or our commitment to growth and shareholder returns.”
According to reporting about the failed deal, Carlyle faced challenges with the navigation of the cross-border transaction and the highly regulated environment when it came to energy. Carlyle stated that it intends to “continue to maintain an active presence in global energy and infrastructure markets and may revisit its Mediterranean strategy in the future under more favorable regulatory conditions,” Private Equity Insightsreported.
Although neither party has expanded publicly on the reasons for the deal’s failure, several factors could have contributed. The now failed transaction was in process during tariff and energy negotiations between the U.S. administration and the European Union, which are still ongoing today. A potential impact of these negotiations could be U.S. investors withdrawing from the region. More specifically, private equity acquisitions of public companies could decrease. In Italy, increased energy regulations alongside declining gas consumption raised questions about continued investment in the fuel in the country.
When it comes to overall upstream energy mergers and acquisitions (M&A) trends globally, private equity is not leading the way in Europe. European oil majors have led the activity, representing 66% of the deals over other types of companies, like private equity firms. Furthermore, an ongoing consolidation of the sector has increased the cost of these types of deals, leading to the highest upstream deal value in the first half of 2024, which is higher than in the previous seven years.
Is Carlyle to Face Another Fundraising Struggle Ahead?
Carlyle Chief Executive Harvey Schwartz announced during the firm’s Q1 2025 earnings call on May 8th that Carlyle is aiming to launch its next US buyout flagship fund, Carlyle Partners Fund IX, in Q4 of this year, Private Equity Internationalreported. Schwartz explained that the stage of the Fund IX launch will be dependent on its predecessor fund, Carlyle Partners Fund VIII, performance.
Fund VIII fundraised for two years, and after meeting with over 200 large institutional investors, Schwartz and Carlyle leadership failed to earn commitments from several large prior investors, and only raised 54% of the fund’s fundraising goal. A few of the limited partners that committed to Carlyle Fund VII but did not commit to Fund VIII were The California State Teachers’ Retirement System (CalSTRS)[4], The State Teachers Retirement System of Ohio (STRS Ohio),[5] and Florida State Board of Administration (SBA Florida)[6].
Investors Should Refuse Further Investments with Carlyle
It remains to be seen whether Carlyle’s failed attempt to expand its already extensive overseas fossil fuel portfolio will lead to negative impacts on its limited partners. Investors, such as public pension funds, commit millions of their pensioners’ dollars, and sometimes hundreds of millions of dollars, to private equity firms, entrusting those firms to make sound investments with the goal of solid returns. If the private equity firm fails to make strategic investments, the firm could put the limited partner’s expected returns at risk.
Oil and gas demand is forecasted to peak before 2030, and along with the environmental and community harms associated with operating fossil fuel assets, private equity exits are also trending down, which could increase the risk of stranded assets. Investors should not invest in Carlyle’s upcoming flagship fund unless the firm ceases further investments in oil and gas operations and responsibly transitions its existing energy portfolio to clean, renewable energy.
[1]https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator#results
[2] The Pitchbook data was supplemented with additional deals found in the Private Equity Global Energy Tracker database, which was found via company websites, press releases, news reports, and/or SEC filings.
[3] This number is based on deal amounts available on Pitchbook deals and is a vast undercount due to a majority of deal amount data being unpublished by Pitchbook.
[4] https://www.calstrs.com/files/5c3703f7c/CalSTRSPrivateEquityPerformanceReportFYE2024.pdf
[5] Pitchbook.
[6]https://www.sbafla.com/media/zxxprkng/2023-2024-air-draft3625-final-updated.pdf
