The coronavirus pandemic that has slammed oil demand and prices is forcing energy majors to tighten their belts on exploration, even if finding new deposits remain essential to their existence.
While the sector is increasingly diversifying into greener energies such as electricity and wind power, its core business remains oil and gas. “Questions abound over whether it is still profitable to look for oil given subdued demand growth prospects and a low-price environment,” Stephen Brennock, analyst at oil brokers PVM, told AFP. “The answer seems not, judging by the recent spate of massive hydrocarbon asset writedowns.
“Set against this backdrop, I don’t expect a rebound in drilling in the medium-term. “Instead, oil majors will be forced to beef up their green energy portfolios in order to survive,” Brennock said.
Compared to pre-virus plans, the energy sector has slashed exploration projects in UK North Sea waters by 70 percent and by 30 percent off the coast of Norway, according to research group Westwood. US oil giant ExxonMobil has cut its total exploration plans by 30 percent, or an investment reduction of $10 billion. European rivals ENI, BP and Equinor have carried out similar moves, which have in turn hurt subcontractors including French oil services group CGG, which expects revenue to slump 40 percent this year.—Agencies