What on earth is going on?

David Bamford

22 August 2018

Why am I asking this question? This Year, this Month, this Week?

Well, here’s a starting point. https://www.telegraph.co.uk/business/2018/04/21/big-oils-big-identity-crisis/

 

From the Sunday Telegraph of a couple of weeks ago: “Big Oil’s Big Identity Crisis”. A neat article unfortunately obscured behind the Telegraph’ ‘Premium’ wall.

 

What was this all about? Well, let’s try a one word answer.

 

EQUINOR!!

 

Does everybody know what this is? Statoil’s re-branding. Sounds a bit like an insurance company to me but what do I know!!

 

However, they are joining the re-branding wave of Majors and mini-Majors doing the same thing, and saying similar things.

 

They have all been under pressure on several fronts, for example:

  • On sustainability over the last 2 or 3 years. “Are we a ‘fossil industry’, likely to go the same way as Coal?” Under pressure to reduce Carbon ‘responsibility’. Anticipating growth in electric vehicles.
  • Cost Pressures equalling to major manpower cuts since 2014, hitting suppliers over the head and selling off poorly performing assets.
  • Reserves Replacement: Everybody doing poorly; in particular Frontier Exploration has not performed well since around 2010.

 

So different pressures over different periods leading to a need for Change! And the response is;

“We are Energy Providers!”

Electricity generation = “more than 50% gas in our portfolios”.

“We will focus on Unconventionals and/or Mature Provinces.”

“We are OK at $60/barrel!”

These very broad statements being made by Shell, BP, Total, Statoil and to some extent Chevron and Exxon.

 

And add to this a couple of ‘new’ themes…

 

  • Firstly “Digitization” which is tending to focus for the moment on putting sensors in and around every price of oil field equipment to monitor performance, predict failures etc.
  • And “Decarbonisation” which is very focussed on Carbon Capture and Storage, especially for gas-fired power stations, and also committing to an overall reduction in GHG emissions.
  • A particular issue is or are Methane Emissions, much more dangerous than Carbon Dioxide, and likely to increase the more Gas is part of the “Energy Providers” portfolio.

 

To summarise, in response to:

 

  • Questions on “Sustainability” => let’s not be in a ‘fossil industry’
  • Growth in electric vehicles => increased electricity demand

 

Majors and mini-Majors are rebranding:

  • As Energy Providers, especially of electricity
  • With > 50% Gas in Portfolios, “reducing Emissions”.
  • Returning to ‘Mature Provinces’ and pursuing Unconventionals.

 

These changes will impact, indeed IMHO seriously challenge, several different groups, for example:

  • Small-Mid Size Companies who brand themselves as a “pure play” on oil or gas exploration and production.
  • Investors who wonder about the nature and viability of the company they have their money in.
  • Petro-technical staff who suddenly find themselves working in a very different outfit to the company they joined.
  • And what does this mean for geophysical contractors, especially those who only offer seismic technology?
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