Chevron, Exxon Mobil, and Other Energy Companies are Speeding-Uup their Searches for New Oil and Gas Prospects. far away from the Perils of the Middle East War.
Exxon recently outlined a potential plan to pump up to $24 billion into Nigeria’s deep-water oil fields, while Chevron expanded its footprint in Venezuela. BP bought stakes in oil blocks off the coast of Namibia, and TotalEnergies signed an exploration deal with Turkey. Major oil companies could together create $120 billion in value from their exploration ventures in coming years, the energy research and consulting firm Wood Mackenzie estimated Thursday.
Iran’s attacks on energy infrastructure and a shipping bottleneck in the Persian Gulf region have sparked a global scramble for oil and lopped off billions of dollars in revenue for some Western oil companies. But the surge in energy prices is providing the oil industry with a windfall of cash that is expected to help it venture into territories previously out of reach or abandoned years ago. The influx comes after many drillers cut spending on exploration to return more cash to shareholders.
“Never underestimate the romance of upstream people looking at opportunities. They say, Boy, wouldn’t it be great if we could do this or that.” said Edward Chow, a nonresident senior associate at the Center for Strategic & International Studies and a former Chevron executive. “Now, you’ve got the cash to do it.” During a call Thursday with executives from Exxon, Chevron and other oil companies, Energy Secretary Chris Wright and Interior Secretary Doug Burgum urged them to keep bolstering oil output to counter surging prices ahead of a looming supply shortfall.
U.S. oil futures are trading near $88 a barrel, above the mid-$60 range where they were hovering before the war. Prices plunged Friday after Trump and Iranian officials said the Strait of Hormuz had reopened. Iran later said the strait was closed again. The oil companies want to maximize their production to take advantage of the higher prices—but within the confines of their current budgets and without taking on the added costs of making major investments, people familiar with the matter said.
Combined, major oil companies spent an average of $19 billion on global exploration each year from 2021 to 2025, according to Wood Mackenzie. Energy executives are also focused on a longer-term mission: finding enough oil and gas to fuel their profits into the 2030s, some of the people said. The closure of the Strait of Hormuz, a critical oil-and-gas chokepoint between Iran and the United Arab Emirates, has trapped 20% of the world’s daily diet of oil and liquefied natural gas.
Some Western oil companies with operations in the Middle East have taken significant hits. Exxon has said the war curtailed its global oil-and-gas production by 6% in the first quarter. The company is poised to lose about $5 billion in revenue a year after suffering damage at natural-gas facilities in Qatar. Its partner QatarEnergy has estimated that repairs could take up to five years.
For now, the oil-and-gas sector is expected to turn its attention away from the Persian Gulf. A few days before the war began, Chevron said it was entering exclusive talks with Iraq’s Basra Oil for a stake in one of the world’s largest onshore oil fields, West Qurna 2. But analysts said it is doubtful that Western oil companies would sign any major deals in the Middle East until the conflict is fully resolved.
Instead, the economic fallout from the war is driving the companies to diversify their portfolios—and spread out the risk of disruption across the globe. Energy companies are also trying to boost their reserves. The world’s oil producers need to find enough new resources to add 300 billion barrels to their collective reserves to meet global demand through 2050, according to Wood Mackenzie. Exxon, Chevron, Shell, BP and TotalEnergies are looking closely at new drilling prospects in Africa, South America and the eastern Mediterranean that could refill their reserves for the next decade.
This past week, Exxon took a step toward drilling off the coast of Greece. In recent months, it signed preliminary exploration agreements with Iraq, Turkey and Gabon. In Trinidad and Tobago, the company is conducting seismic work to find oil and gas in the country’s deep waters. Exxon’s international spending came in at about $9 billion last year, including its existing developments.
Meanwhile, Chevron has boosted its exploration team, including through last year’s $53 billion acquisition of Hess. It has brought a former TotalEnergies executive, Kevin McLachlan, on board as its vice president of exploration. Chevron has earmarked $7 billion in spending on offshore developments around the world this year.
In Venezuela, where Chevron is the largest foreign investor, the company agreed this past week to an asset-swap deal that would boost its position in regions rich in viscous heavy oil that U.S. refineries favor. The state-run Petróleos de Venezuela sold the company an additional 13% working interest in one of its joint ventures in Venezuela. Another project, in which Chevron has a 30% stake, was granted development rights to a neighboring area.
At an energy conference in Houston last month, Chevron Chief Executive Mike Wirth said the country’s recent move to change laws that govern fossil-fuel deals is a good first step. “There’s still things that I believe need to happen to encourage investment at the scale that people would like to see,” Wirth said. He added that operators in Venezuela need more durable and predictable dispute resolution, among other concerns.
The White House is pushing for more U.S. oil companies to plow money into Venezuela’s dilapidated oil sector. Most drillers are cautious about investing there after years of mismanagement. Chevron is set to conduct exploration work later this year in Egypt, where it holds 9 million net acres in the Mediterranean Sea, and it recently confirmed substantial oil discoveries in the Gulf of Mexico. Earlier this year, it won four offshore leases near Greece, as well as a block award in oil-rich Libya.
Oil prices are expected to remain elevated over the coming months even if the bottleneck in the Strait of Hormuz clears.
“Sustained high oil prices are the best friend of exploration,” said Schreiner Parker, an analyst at Rystad Energy, a research and consulting firm. “In the medium to longer term, there will be a risk premium attached to every barrel coming out of the Persian Gulf that will push people into frontier exploration.”
NYC Wins When Everyone Can Vote! Michael H. Drucker
No comments:
Post a Comment