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Where are the big oil companies with their massive $200 billion in profits?

T.award winning The End of World War II Franklin D. Roosevelt attended the fateful gathering of world leaders who helped set the course of geopolitics for decades. No, not the Yalta Summit.right after FDRMore, when Churchill and Stalin divided the world into spheres of influence, the American president slipped onto an American naval ship and quietly met with the King of Saudi Arabia, Abdel Aziz ibn Saud. In return for protecting the Saud’s sovereignty over the Holy Land, the monarch agreed to allow American oil companies access to his country’s oil.

Anglo-Persian Oil Company (now blood pressure), the Saudi-American alliance formed the oil axis, and the Western majors first longed for the Persian Gulf and then set their sights on other distant longitudes. Oil companies — American ExxonMobil and British Chevron blood pressure Shell, and France’s TotalEnergies drilled from South America to Siberia. Now, a whirlwind of geopolitical, economic and environmental factors is causing these “supermajors” to increasingly look north and south rather than east and west.

This restructuring comes at a time when big oil companies’ coffers are overflowing after two years of high energy prices (see Figure 1). On February 2nd, British Shell announced that its 2022 annual net profit will be close to his $40 billion. This comes on the heels of his ExxonMobil in the US reporting a record annual net profit of $59 billion (excluding one-time charges). Major domestic rival Chevron also reported that he more than doubled his net profit to $36 billion. blood pressure And TotalEnergies will be added to the haul on February 7th and 8th respectively.

Overall, bank Credit Suisse’s Amy Wong believes these five supermajors could have made about $200 billion in profits last year. This prize slug will flow to shareholders. In January, ExxonMobil announced it would pay out more than $35 billion to owners this year and next year. Some people go to pay off their debts. However, much of the rest is reinvested.

After years of restrained investment in oil and gas as a result of pandemic demand destruction and climate-related policy animosity, big oil companies are spending to find oil and get it out of the ground again. S.&P. Global upstream capital spending across the industry, including private sector giants and national oil companies, rose from a 15-year low of around $350 billion in 2020 to around $450 billion last year, according to research firm Global. I’m assuming. It may still be high this year.

All this new money is not flowing to the same old places. Western oil giants are undergoing a “fundamental shift in mindset,” says Edward Morse of bank Citigroup. U.S. companies are beating the pullback from remote “frontier” regions where political risk is high and the infrastructure lacking to bring hydrocarbons to market as cleanly as possible. European rivals who are less risk averse have shunned some of the American projects in favor of Africa with its potential for new climate-friendly development. Restructuring of the oil business will take place.

change in latitude

For the US supermajors, this means less interest outside the Americas. ExxonMobil, like most Western companies, left Russia after invading Ukraine. We have also offloaded or want to offload assets in countries such as Cameroon, Chad, Equatorial Guinea and Nigeria. Chevron has sold projects in the UK and Denmark (and Brazil) and has not renewed its expired goodwill in Indonesia and Thailand. James West of investment bank Evercore believes Chevron and ExxonMobil are shifting large amounts of capital spending to South America and the United States itself. ExxonMobil invests heavily. Newly discovered fields in GuyanaChevron plans to put more than a third of its capital spending this year into US shale, and another 20% into the Gulf of Mexico.It reopened last month with the blessing of President Joe Biden Trading crude oil from Venezuelaa dictatorship that has long been on America’s prank list.

European oil giants are also reducing their east-west exposure. blood pressure and Shell, along with ExxonMobil, are exiting Russia, causing write-downs of as much as $25 billion and $5 billion, respectively. Shell also disposed of shale assets in Texas and reportedly put some of the Gulf of Mexico for sale. blood pressure has sold Mexican oil assets and is rumored to pull out of Angola, Azerbaijan, Iraq, Oman and the United Arab Emirates. TotalEnergys is exiting the Canadian oil sands.

Instead, Europeans’ gazes, like those of their American rivals, are directed southwards. In January, Claudio Descalzi, boss of the Italian non-supermajor Eni, called for Europe to turn its attention to Africa, where it was displacing Russian energy. He argued that it would facilitate Europe’s access not only to fossil fuels, but also to renewables and cleaner alternatives such as hydrogen, which could be transported or piped northwards. On January 28, Eni announced that he had signed an $8 billion natural gas contract with Libya’s national oil company (which includes a small amount of money for carbon capture and storage). increase). Norway’s national oil company, Shell and Equinor, has signed a deal with Tanzania to build her $30 billion liquefied natural gas (liquefied natural gas) terminals in East African countries. TotalEnergies invests in gas projects in Mozambique and South Africa.

There are two main reasons for this reorganization. The first is the main concern of Americans, and it concerns risk and return. In the days before high oil prices, oil bosses spent, in one word, “like drunken sailors.” A year of overinvestment and poor cost control led to enormous waste and overproduction. Years before the covid-19 pandemic, oil projects from the Caspian Sea to the Permian Basin lost billions of dollars. Tens of billions more dollars in shareholder value went up in smoke.

Investors are demanding tighter capital discipline from oil company bosses these days. And my boss is listening. Total industry spending is up from recent lows, but still down from its peak of nearly $800 billion in 2014. Most of it is directed to “short cycle” investments that will generate returns within five years rather than ten years or more. “I’ve been in the industry since her 1990s, and I’ve never seen such a focus on efficiency,” says Julie Wilson of consultancy Wood Mackenzie. This pursuit of efficiency means fewer risky bets in inhospitable locations such as the Arctic and the deep ocean floor, and more projects in familiar jurisdictions with fewer political and geological challenges.

Of course, for American companies, there is no closer place than America. They also understand South America. And like Guyana, some of the backyards don’t know very well. A country whose long-rumored oil abundance was only confirmed in her 2015, the country, counterintuitively, could also be less politically risky in important ways. Unlike politicians in many resource-cursed dictatorships, who cannot imagine a future without oil, politicians in newly discovered places are more cautious about their prospects. As a result, it tends to offer oil companies more favorable terms to bring hydrocarbons to market faster. In Guyana, ExxonMobil went into production just two years after its first deepwater oil discovery.

To Europeans, African countries, which often maintain rational relations with former colonial powers, appear attractive for similar reasons. I’m starting to feel uneasy about my relationship with the US oil industry. In 2021, TotalEnergies will leave the American Petroleum Institute. This is because lobby groups opposed tougher rules on electric vehicle subsidies, carbon pricing and emissions of the powerful greenhouse gas methane.

In doing so, European businesses are responding to growing pressure from consumers, policymakers and investors to start decarbonizing their portfolios. They are looking for new investments. Because such investments using modern technology tend to be more efficient and less carbon-intensive than traditional assets that rely on leaky and aging infrastructure. Moreover, oil companies, especially in Europe, are looking beyond fossil fuels. The bank’s JPMorgan Chase’s James Thompson said a historic correlation between higher oil prices and increased capital spending in oil and gas has broken down at 11 large private energy giants. I discovered that He will put more money into low-carbon projects.

Projects like this are really booming, especially among European companies, and in many of the same places as their new hydrocarbon ventures. Last May, Eni signed a deal with Sonatrach, Algeria’s national oil company, to develop green hydrogen from renewable sources. blood pressure Mauritania is doing the same and TotalEnergies is supporting renewable energy production in South Africa. Looking north, Shell last year paid about $2 billion to Nature Energy, a Danish producer of “renewable” natural gas (RNGs) made from agricultural waste, etc. in December blood pressure Completed the $4.1 billion acquisition of Archaea. RNGsBroker Bernstein’s Oswald Clint predicts an ‘era of mega-consolidation’ in green energy led by European giants. Last year, the oil majors already signed 22 renewable energy contracts, the largest of which is his five, totaling him $12 billion. Clint believes that in 2030, major European companies could spend about half of their capital expenditures on low-carbon initiatives.

The North-South reorganization of the Super Major is far from complete. bp still has some investments in the Gulf of Mexico.Shell and Total Energy are betting on Qatar liquefied natural gasExxonMobil is committed to gas projects in Mozambique. Chevron is expanding its oil projects in Kazakhstan and is reportedly resuming talks with the Algerian government over the country’s shale reserves. . The future of energy exploration looks much leaner, a little greener, and more vertical.

https://www.economist.com/business/2023/02/06/where-on-earth-is-big-oil-spending-its-200bn-profit-bonanza Where are the big oil companies with their massive $200 billion in profits?

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