Global Energy Companies Are Cutting Back On Oil And Gas Exploration

The coVID-19 outbreak has led to a sharp drop in energy demand and oil and gas prices, leading energy suppliers around the world to put the brakes on oil and gas exploration projects and stop rushing to develop new oil and gas resources.

"The question is: against a backdrop of poor growth prospects for energy demand and low oil prices, is it profitable to develop new fields?" "The answer is no," Stephen Brunnock, an analyst at THE British oil brokerage PVM, told reporters this month.

According to the Westwood Research Group, oil and gas exploration projects in the UK North Sea are 70 per cent lower than before the outbreak, while projects off Norway are being cut by 30 per cent.

Exxonmobil, the US energy giant, has cut its oil and gas exploration by 30 per cent, equivalent to a $10bn investment cut. Similar moves by Eni of Italy, BP of Britain and Statoil of Norway have led to a slump in the performance of some sub-contractors specialising in exploration, with France Geophysical expecting a 40% drop in revenues this year.

More than 30 US oil exploration and production companies have filed for bankruptcy this year, according to Us law firm Highball international. Norway's Lystad Energy predicts that if oil prices remain low at around $40 a barrel for a long period of time, another 150 energy companies around the world will go bankrupt by 2022.

Bienay Siljo, energy analyst at Svig, a Swedish bank, believes how long the global oil companies cut back on exploration projects will "depend on oil prices". Mr Brunnock predicted that global oil and gas exploration projects "will not bounce back in the medium term".

Observers noted that Gazprom and Anglo-Dutch Shell announced in July that they would jointly explore for oil and gas in the Arctic, and that the United States approved oil and gas exploration in Alaska's National Arctic Wildlife Refuge in August. However, some energy analysts question whether such projects can proceed smoothly in the current market climate.

Rafaela Hein, an analyst at JBC Energy, an Austrian consultancy, believes that exploring for and extracting oil and gas resources in the Arctic is "not economically feasible" at the moment. With international oil prices still low, these projects may be difficult to carry out smoothly.

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