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Top oil companies hit brakes on search for new fossil fuels

  • Ron Bousso

    Reuters

London   /   Mon, January 25, 2021   /   11:46 am
Top oil companies hit brakes on search for new fossil fuels An oil pumpjack operates at dusk Willow Springs Park in Long Beach, California on April 21, 2020, a day after oil prices dropped to below zero as the oil industry suffers steep falls in benchmark crudes due to the ongoing global coronavirus pandemic (AFP/Apu Gomes )

Top oil and gas companies sharply slowed their search for new fossil fuel resources last year, data shows, as lower energy prices due to the coronavirus crisis triggered spending cuts.

Acquisitions of new onshore and offshore exploration licences for the top five Western energy giants dropped to the lowest in at least five years, data from Oslo-based consultancy Rystad Energy showed.

The number of exploration licensing rounds dropped last year due to the epidemic while companies including Exxon Mobil, Royal Dutch Shell and France’s Total also reduced spending, Rystad Energy analyst Palzor Shenga said.

“Acquiring additional leases comes with a cost and it demands some work commitments to be fulfilled. Hence, companies would not want to pile up on additional acreages in their non-core areas of operations,” Shenga said.

Of the five companies, BP saw by far the largest drop in new acreage acquisition in 2020. Bernard Looney, who became BP’s CEO in February, outlined a strategy to reduce oil output by 40 percent or 1 million barrels per day by 2030. BP has rapidly scaled back its exploration team in recent months.

Exxon, the largest United States energy company, acquired the largest acreage in 2020 in the group, with 63 percent in three blocks in Angola, according to Rystad Energy.

Total was second with two large blocks acquired in Angola and Oman.

Acquiring exploration acreage means companies can search for oil and gas. If new resources are discovered in sufficient volumes, the companies need to decide whether to develop them, a costly process that can take years.

As a result, the drop in exploration activity could lead to a supply gap in the second half of the decade, analysts said.