Olduvaiblog: Musings on the coming collapse

Home » Posts tagged 'ENI'

Tag Archives: ENI

‘Big oil’ getting smaller as production keeps falling | | Platts

‘Big oil’ getting smaller as production keeps falling | | Platts.

February 14, 2014 – Richard Swann in London

* Top seven western majors all seeing liquids output fall
* Supermajors’ share of global market dropping every year
* BP reports fastest decline of 30% from 2009-13
* Production becoming more evenly split between oil and gas

The biggest western oil companies are continuing to see their oil output decline, despite record investment in recent years spurred by sustained crude prices in excess of $100/barrel, according to data released by the companies.

Furthermore, with total world oil output continuing to rise every year, the western majors are seeing their share of the global market fall even faster, with new volumes coming largely from their rivals in places like Russia and a host of smaller companies at the heart of the shale oil boom in the US.

Analysis continues below…


Request a free trial of: Oilgram News Oilgram News
Oilgram News Oilgram News brings you fast-breaking global petroleum and gas news on and including:

  • Industry players, upstream and downstream markets, refineries, midstream transportation and financial reports
  • Supply and demand trends, government actions, exploration and technology
  • Daily futures summary
  • Weekly API statistics, and much more
Request a trial to Oilgram News Request More Information

Combined output of crude and other liquids by the seven biggest western majors — ExxonMobil, Shell, BP, Chevron, Total, ConocoPhillips and Eni — amounted to 9.517 million b/d last year, down 2.2% from 2012 and marking the fourth consecutive year of decline.

Liquids output from the same group has been falling every year of late, having been as high as 10.865 million b/d in 2009.

As a group, the seven have seen their combined liquids output fall by 1.348 million b/d, or 12.4% over the period from 2009 to 2013.

The most notable contribution to the overall decline comes from BP, whose production of oil and other liquids has fallen by more than 30% from 1.695 million b/d in 2009 to 1.176 million b/d in 2013.

These figures do not include production associated with BP’s current 19.75% stake in Russia’s Rosneft or its previous 50% stake in Russian oil producer TNK-BP.

This is a much sharper fall than other majors have experienced, and is evidence of the scale of the asset divestment program the company has been going through to cover its actual and potential liabilities in the wake of the disastrous Gulf of Mexico oil spill in 2010.

While its peers have not seen production fall by the same degree, they have nonetheless all experienced declining oil production since 2009.

Even ExxonMobil, the biggest of the group in terms of production and profitability, saw its oil output fall by 4.5% in 2011 and 5.5% in 2012, the two years with the highest average international oil prices of all time.

In 2013 ExxonMobil’s oil output rose by 0.8% to 2.202 million b/d, but it still remained more than 200,000 b/d below where it was in 2010.

Shell, Chevron, Total, ConocoPhillips and Eni also all saw their liquids production fall in 2013.

Total’s output declined by 15.5% between 2009-13, Eni’s by 17.3% and ConocoPhillips’ by 12.4%. Shell has seen the smallest fall of 2.5% over thesame period.

Dwindling share of global output

According to the International Energy Agency, total world oil supply has risen in recent years from 85.66 million b/d in 2009 to an average of 91.53 million b/d in 2013.

As a result, the seven leading western majors have seen their share of this total supply fall from 12.7% to 10.4% over the same period.

While this group is seeing its production fall, others have clearly been heading in the opposite direction.

The most obvious is Russia’s Rosneft, which has grown at breakneck pace in recent years on the back of a debt-funded acquisition spree, including the purchase of former rival TNK-BP.

Rosneft is now the world’s biggest publicly listed oil producer with total crude and liquids output of close to 4.2 million b/d.

In other words, Rosneft alone now produces almost as much oil as ExxonMobil, BP and ConocoPhillips combined.

The western majors are not short of either the expertise to produce more oil or the money to fund developments after 2013 marked the third consecutive year of Dated Brent prices above $108/barrel.

The recurring challenge for the western companies in recent years has been to find attractive investment opportunities, with several of the world’s leading oil reserves holders offering limited, or even no access to international operators.

“It’s an access question,” said an official from one of the western majors, who asked not be identified. “Who will let us in? They’ll only let us into the difficult bits like the deepwater projects, or tight gas, that kind of thing,” he said.

Gas growth

With their liquids output falling, the so-called “oil majors” are gradually becoming less oily and more reliant on gas production.

Oil accounted for more than 60% of ExxonMobil’s total hydrocarbons output in 2009, but by last year this figure had fallen to less than 53%.

It is a similar story for Total, where oil’s share of total production has fallen from 60.5% in 2009 to 50.8% in 2013.

Shell produced more gas than liquids last year, the third time in the last four years this has happened, and BP is not far away from a 50:50 split.

Of the seven majors who embody the image of “Big Oil” the only one bucking the trend towards greater gas exposure is Chevron, where oil continues to account for two thirds of all production — a full 10 percentage points more than any of the rest of the peer group.

Table: Production of oil and other liquids by leading western companies

Production of oil and other liquids by leading western companies

2013 2009 Change
ExxonMobil 2.202 2.387 -0.185 -7.8%
Chevron 1.731 1.846 -0.115 -6.2%
Shell 1.541 1.581 -0.040 -2.5%
BP 1.176 1.695 -0.519 -30.6%
Total 1.167 1.381 -0.214 -15.5%
ConocoPhillips 0.867 0.968 -0.101 -10.4%
Eni 0.833 1.007 -0.174 -17.3%
Total 9.517 10.865 -1.348 -12.4%

(all units in million b/d)

Source: company statements

Rising Costs Hit Balance Sheets of Major Oil Companies

Rising Costs Hit Balance Sheets of Major Oil Companies.

Quarterly earnings for Royal Dutch Shell have declined sharply due to large expenditures, delays, and lower than expected production. The oil-giant reported that it expects fourth quarter earnings from 2013 to come in 70% lower than the same quarter for the previous year. Fourth quarter earnings are expected to decline to $2.2 billion, down from $7.3 billion in 2012. The decline prompted Shell to issue a profit warning, its first in 10 years, hitting its stock price. The company expects to release a full-earnings report on January 30.

Shell’s capital spending surpassed $44 billion in 2013, a 50% jump over the prior year.  While investing in growth is necessary to turn a profit, many of Shell’s projects are floundering. After sinking over $5 billion in a multi-year effort to tap oil in the Arctic, Shell has nothing to show for it except for a series of mishaps and bad publicity. The company wants to return to the Arctic in 2014 after taking the year off last year to regroup, and submitted a scaled-back plan that they hoped would soothe the concerns of the Department of Interior. Yet with a January 22, 2014 decision from the Court of Appeals from the Ninth Circuit found that Interior violated the law when it sold offshore leases for exploration back in 2008. The ruling throws Shell’s plan into deep uncertainty, and is merely the latest blow to the company’s bungled Arctic campaign.

Select the reports you are interested in:
Who Will be the Big Winners in the Coming LNG Bonanza
How to Play the Coming Boom in Advanced Fracking Technology
Why the Subsea Processing Sector will See Huge Gains in the Near Future
Investment Opportunities in Geothermal Power Generation
Machine to Machine Technology – A $1 Trillion Opportunity!
Our Top Water Technology Picks for 2013
NO-SPAM: Under no circumstances will weEVER rent, sell or give away your email

 

Shell has also bet big on Kazakhstan, sinking over $30 billion in a project, again with little to show for it thus far. The project is 8 years overdue.

Related article: UAE to Invest $1.2bn in Kurdish Oil

The latest news may be indicative of a new phase for major international oil companies. Shell is not alone in investing huge sums to develop complex oil fields in far flung places around the globe. As easy-to-get oil declines, Shell and other oil companies are forced to search for oil in places that present geological and engineering difficulties –and thus present significantly higher costs. According to Reuters, the rising cost of oil projects around the world is a major topic of discussion at the World Economic Forum in Davos.

Another example is Chevron’s Gorgon LNG project, which is expected to come in at $54 billion, or $20 billion more than originally expected. Italian oil company ENI expects to blow around $50 billion on the Kashagan oil field in Kazakhstan, five times what it expected.

Ben van Beurden, Shell’s new CEO, hopes to take a more conservative approach, paring back large investments in “elephant projects,” according to the Wall Street Journal.Other major oil companies are also promising their shareholders they will cut back on expenditures. Reducing costs may be a good strategy in the short-term, but the profitability of major oil companies depends on their ability to replace reserves and produce oil, not just now, but 10-20 years from now. If these companies decide not to invest in new oil fields, they will not have additional capacity coming online in the years ahead.

But it is telling that Shell and others do not find it wise to invest in new oil projects. If that is indeed the case, then the world could be looking at much more expensive oil in the not-so-distant future as existing fields naturally decline and supply tightens.

By. Nick Cunningham

<span>%d</span> bloggers like this: