Top Oil Companies Sharply Slow Search for New Fossil Fuels

Oil pumpjacks at the Huntington Beach Oil Fields in Huntington Beach, Calif., on April 20, 2020. (Mario Tama/Getty Images)

The top five Western oil and gas companies sharply slowed the search for new fossil fuel resources last year, data from Oslo-based consultancy Rystad Energy show.

The five companies are Royal Dutch Shell, BP (British Petroleum), France’s Total, ExxonMobil, and Chevron.

Acquisitions of new onshore and offshore exploration licenses for the top five Western energy giants dropped to the lowest in at least five years because of the epidemic, Rystad Energy analyst Palzor Shenga said.

“Acquiring additional leases comes with a cost, and it demands some work commitments to be fulfilled. Hence, companies would not want to pile up on additional acreages in their non-core areas of operations,” Shenga said.

Global oil demand encountered an unprecedented collapse of 8.8 million barrels per day in 2020, according to the International Energy Agency (IEA).

IEA also anticipated capital investment in the energy sector to fall by 18 percent in 2020, with the largest drop in spending on new oil and natural gas supply.

Of the five companies, BP saw by far the largest drop in new acreage acquisition in 2020. CEO Bernard Looney outlined a strategy to reduce oil output by 40 percent or 1 million barrels per day by 2030; the company has rapidly scaled back its exploration team in recent months.

Energy transition, regulation, and the electrification of cars also are considerations of some big energy companies.

Last September, BP agreed to pay Equinor $1.1 billion to purchase 50 percent interest in the Empire Wind and Beacon Wind projects from Norway’s Equinor.

“This is an important early step in the delivery of our new strategy and our pivot to truly becoming an integrated energy company,” Looney said in a statement at the time.

In recent years, governments and companies worldwide have announced goals to reduce their environmental footprint and move away from fossil fuels. Both the UK and European Union are, for example, targeting net-zero greenhouse gas emissions by 2050, CNBC reported.

Last month, Japan announced that it would stop the sale of new gasoline-powered cars by the mid-2030s, but the sale of hybrid gas-electric cars will still be permitted after 2015.

California announced last September to end the sale of new gasoline- and diesel-powered passenger cars in the state by 2035, becoming the first U.S. state to commit to doing so.

The European Union aims to have at least 30 million zero-emission vehicles on its roads by 2030.

Darren Woods, ExxonMobil’s CEO, expressed more optimism in an email delivered to all company employees in October.

“The transition of the energy system will take a long time because of its size, complexity, and amount of infrastructure required to keep it running efficiently,” he suggested.

The IEA projected that oil and gas would remain at 53 percent of the global energy mix in 2040, decreasing from the current 60 percent or so, Woods said.

Reuters contributed to this report.