Oil majors suffer massive losses in 2020
The oil majors — BP, Chevron, ExxonMobil, Shell and Total — suffered $77 billion in losses for the yr.
Shell CEO Ben van Beurden referred to as 2020 a rare yr.
Total’s Patrick Pouyanne stated: “All of us will remember 2020 as a landmark year that brought unexpected challenges and led to significant changes.”
While a lot of the losses had been accounting costs to document the drop in the worth of their belongings, the drop crude oil costs — which briefly turned unfavorable in 2020 for the primary time ever — prompted actual ache.
The unfold of the coronavirus and the lockdowns meant to gradual it prompted massive slowdowns in financial exercise, with worldwide air journey coming to a close to standstill.
This dampened demand and as oil producing nations did not instantly reduce manufacturing, crude costs plummeted.
The disaster referred to as additional into query the monetary mannequin of the oil majors, which already face a longer-term menace from a shift away from fossil fuels to fight local weather change.
S&P Global Ratings stated final month that it “believes the energy transition, price volatility, and weaker profitability are increasing risks for oil and gas producers.”
It positioned the shares of Chevron, ExxonMobil, Shell, Total in addition to the Chinese oil firm CNOOC on look ahead to a scores downgrade.
– Rising stress – The oil majors “are skating on ever-thinning ice as the effects of climate change combine with other events like the Covid-19 pandemic” stated Professor David Elmes on the Warwick Business School.
“The pressure to diversify is rising,” he added.
European oil majors have recognised this and have begun to diversify their operations together with investing in renewable power regardless of their efforts reduce prices.
Total even plans to vary its identify to TotalEnergies to raised replicate its involvement in numerous power sources. The transfer follows Norway’s Statoil rebranding itself Equinor.
Renewable energies supply extra secure income than oil and fuel, that are risky.
That stability just isn’t the one factor attracting the oil majors.
“The reasons for diversifying today are to be found with the climate change policies and pressure from investors, shareholders and even clients who are pushing the oil firms to decarbonise,” stated Francois Leveque, a professor at Mines-ParisTech.
US oil majors have typically resisted shifting into renewables. And whereas ExxonMobil has moved to create a “low carbon” unit, it can focus totally on carbon seize tasks that would scale back the emissions of its services.
“They are driven by shorter-term profits and US markets don’t much like companies which diversify,” stated Leveque.
At the worst of the disaster the 2 US oil majors thought of one other answer in keeping with the Wall Street Journal — a merger that may have created a massive oil agency.
