Big Oil hits brakes on search for new fossil fuels

Big Oil hits brakes on search for new fossil fuels

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London: Data show that last year’s top oil and gas companies significantly slowed down their search for new fossil fuel resources due to spending cuts triggered by falling energy prices due to the coronavirus crisis.

According to data from Oslo consulting firm Rystad Energy, the acquisition of new onshore and offshore exploration licenses by the five major Western energy giants has fallen to the lowest level in at least five years.

Rystad Energy analyst Palzor Shenga said that due to the pandemic, the number of exploration permits declined last year, while companies such as Exxon Mobil, Royal Dutch Shell and French Total also reduced their spending.

“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.

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

Exxon, the largest U.S. energy company, acquired the largest acreage in 2020 in the group, with 63% in three blocks in Angola, according to Rystad Energy.

Total was second with two large blocks acquired in Angola and Oman.

Acquiring exploration area means that the company can search for oil and gas. If a sufficient number of new resources are discovered, the company needs to decide whether to develop them, which can take years of expensive process.

Analysts say the result is that the decline in exploration activities may lead to a supply gap in the second half of the decade.

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