Oil majors – ExxonMobil and Chevron have reportedly taken steps to intensify their oil and gas investments despite calls for a global clean energy transition.
Exxon’s $60 billion deal to buy Pioneer and Chevron’s deal to buy Hess for $53 billion have made global headlines this month.
These purchases show that oil majors are intensifying their investments in fossil fuels, despite the global push for a transition to cleaner energy sources.
Analysts highlight that this shift to clean energy is a prolonged process, marked by high costs amidst inflation, increased borrowing expenses, and persistent supply chain challenges.
Oil and gas analyst, Dan D Kunle told Nairametrics that the purchases show that oil majors are still interested in putting their money into viable oil and gas projects.
Kunle emphasized the diverse nature of the energy transition across nations. Even countries with self-sustaining energy are continuing to invest in oil and gas.
He stressed that countries like Nigeria must confront their challenges and allure investments from oil and gas majors to effectively combat the energy poverty plaguing the nation.
While speaking to Yahoo Finance Live earlier this month, Wells Fargo’s senior energy analyst, Roger Read, warned about the extended and challenging nature of the energy transition, emphasizing the considerable expenses involved.
Read pointed out that this is one reason for oil investments, such as Exxon’s recent merger with Pioneer Natural Resources, effectively doubling its oil production in the sought-after Permian Basin.
Chevron’s recent acquisition of Hess secures a significant 30% stake in more than 11 billion barrels of recoverable resources in Guyana.
Note that output from Guyana is expected to grow faster than any non-OPEC producer by 2030.
In the third quarter of 2023, both Chevron and ExxonMobil reported a combined profit of $15.6 billion, coinciding with the rise in oil and fuel prices during that period.
The International Energy Agency (IEA) highlighted in its 2023 World Energy Investment report that major oil, gas, and coal companies are projected to boost investments in unabated fossil fuel supply by over 6% in 2023, totalling approximately $950 billion.
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The bulk of this investment is directed towards upstream oil and gas, expected to surge by 7% to over $500 billion in 2023, matching the levels seen in 2019.
Nearly half of this upsurge might be driven by increased costs.
The IEA also pointed out that numerous large oil and gas companies have announced expanded spending plans due to their unprecedented revenues.
Meanwhile, investment by the fossil fuel industry in clean fuels, such as bioenergy, hydrogen, and carbon capture utilization and storage (CCUS), is picking up in response to more supportive policies but remains well short of where it needs to be in climate-driven scenarios.
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