After years of public vows to wean themselves off fossil fuels, the world’s biggest oil companies are dusting off their drilling maps and doubling down on exploration. The promised pivot to renewables has sputtered, energy security fears have sharpened, and the payoff from oil and gas remains too rich to ignore. Now, from the Gulf of Mexico to Namibia, Big Oil is chasing new barrels in a world that, by its own admission, will still be burning them for decades.
After spending the early 2020s promising a gradual reduction in fossil fuel production and billions of U.S. dollars in low-carbon energy investments, Europe’s biggest oil and gas firms have dramatically changed their priorities as the energy transition proved much slower than anticipated and the energy crisis exposed shortfalls in conventional energy supply.
The U.S. supermajors, ExxonMobil and Chevron, did not have to pivot back to oil and gas – they weren’t going in the renewable energy direction anyway. But both companies are boosting exploration and seek to add advantaged resources to their portfolios to increase reserves.
Shell and BP Boost Exploration
The most notable shift came from the European majors, who scaled back billions of dollars of investment in renewables and are now looking to bolster their oil and gas reserves portfolios. BP and Shell realized that the energy transition faces bigger hurdles than expected and doesn’t pay off in profit margins and shareholder payouts the way oil and gas does.
So, it was back to the basics for BP, Shell, and TotalEnergies. This means more exploration efforts and a focus on areas and strengths that can yield results.
Shell, whose chief executive Wael Sawan has said that reducing global oil and gas production would be “dangerous and irresponsible”, is not happy with its recent track record in exploration.
“We went through a significant reset, I would say, of our exploration department, capability, the funnel because the hard truth is while we have had some good progress in certain areas, it hasn’t delivered what we had wanted,” Sawan told analysts on the Q2 earnings call at the end of July.
Shell will continue to invest in exploration where it has established track records, like the Gulf of Mexico, Malaysia, Oman, and in areas like Namibia.
“We have some exciting wells coming in the next, I’d say, 6 to 12 months,” Sawan said, adding that Shell plays the long game in exploration.
Shell’s UK-based peer, BP, was the last to reconsider its strategy and bet again on oil and gas instead of on renewables.
In a major reset back to oil and gas, BP in February said it would increase its investment in upstream oil and gas to $10 billion per year while slashing spending on clean energy by more than $5 billion a year.
In the upstream, BP will aim for 10 new major projects to start up by the end of 2027, and a further 8–10 projects by the end of 2030. Production is expected to grow to 2.3–2.5 million barrels of oil equivalent per day (boed) in 2030, with capacity to increase to 2035.
That’s a stark departure from the previous strategy to lower oil and gas output by 2030.
On the Q2 earnings call, BP’s chief executive, Murray Auchincloss, touted the start-up of five new oil and gas major projects so far this year. BP also sanctioned four more projects and made ten exploration discoveries in what the executive described as “the best year for discoveries in recent memory”, including the significant discovery in the Bumerangue block offshore Brazil, the supermajor’s biggest in 25 years.
BP hasn’t actually increased its exploration budget very much in the last 12 months, but these 10 discoveries year to date aren’t luck as the exploration team uses technology, including seismic imaging and AI algorithms, Gordon Birrell, EVP, production & operations at BP, told analysts.
The exploration team’s mission “is to fill up our hopper with great resources that we can then bring forward to invest in as major projects,” Birrell said.
French supermajor TotalEnergies “reloaded the exploration portfolio by acquiring exploration permits in the U.S. Gulf, in Malaysia, in Indonesia and Algeria” in the second quarter, CEO Patrick Pouyanné said on the earnings call.
Exxon and Chevron Continue Hunt for Resources
Exxon and Chevron used the years in which European Big Oil promised to help deliver the green transition to amass large portfolios in the top U.S. shale basin, the Permian, and increase and deliver oil projects in their respective key geographies, such as Guyana for Exxon and Kazakhstan for Chevron.
Following the acquisition of Hess, whose completion was announced last month, Chevron gained 30% of Guyana’s Stabroek offshore block—where the operator ExxonMobil is leading the production of more than 660,000 barrels per day (bpd) from several projects in the block.
The asset has a lot to offer, in terms of resources and money, to a company like Chevron, whose reserves replacement ratio has declined in recent years, and its oil and gas reserves have now reached the lowest level in at least a decade.
Chevron’s CEO Mike Wirth said during the Q2 earnings call, “I’m not happy with the results out of exploration over the last few years, but I want to acknowledge our exploration team has been operating in a pretty narrow range.”
In Chevron’s goal to have a balanced and diversified portfolio, “exploration needs to play an important role and we are making some changes to our program and our approach,” Wirth added.
Chevron is looking at frontier exploration, too, with wells in Suriname, Namibia, and Egypt planned toward the end of this year, Chevron Vice Chairman, Mark Nelson, said.
Exxon, for its part, while focused on the Permian and Guyana, is looking at opportunities elsewhere, and has deals in the works for exploration in Libya and a return to exploration offshore Trinidad and Tobago in blocks northwest of Guyana’s Stabroek.
Following years of very low levels of global investment in exploration, the industry’s biggest international firms are ready to search for more resources using the latest technology.
“Companies are refilling a pipeline, not just in drill-ready prospects, but in access to the areas where they would consider drilling,” Jessica Ciosek, head of Americas exploration research at Wood Mackenzie, told the Financial Times.
By Tsvetana Paraskova for Oilprice.com