Oil industry round up
A look at some of the core events in the oil and gas sector.
Exxon exits Europe
Oil major switches mediocre to mega projects.
Oil and gas giant ExxonMobil is aiming to sell off assets totalling US$25mln up to 2021, despite previously having claimed to be curbing divestments at US$15mln. Reuters reported that the company is shedding multiple projects and businesses it has claimed to be non-strategic across 11 countries, including Chad, Australia, the Gulf of Mexico and in the UK’s North Sea.
While Exxon had reported low financial results in recent quarters, the company stated that these sales were part of its long-term plan. Sources revealed to Reuters that the plan included generating funds to buy up promising opportunities, such as mega deposits in Guyana, Mozambique, Brazil, Papua New Guinea and the USA. According to financial services firm Moody’s, reducing its portfolio will help Exxon stabilise its financial position and increase share prices, however, this is unlikely to last due to the spending on new deals.
‘The company’s high level of growth capital investments cannot be funded with operating cashflow and asset sales at projected levels given ExxonMobil’s substantial dividend payout, absent meaningfully higher commodity prices and earnings from downstream and chemicals,’ Moody’s said. In the event of successfully divesting the portfolio, Exxon would exit its entire upstream oil and gas business in Europe.
Oil in reserve
USA eyes oil on Alaskan wildlife reserve.
The Trump administration’s proposal to open up more land for oil drilling in Alaska’s National Petroleum Reserve will complete its 60-day public consultation on 21 January 2020. Currently, half of the 9.3 million hectare area is protected from development, but the revised environmental impact assessment, submitted in late November 2019, aimed to push for lease-sale deals that would boost the local economy.
Of three potential scenarios considered, the high development plan has provoked the biggest response, as it would open up 80% of the land for drilling, including the entire coastal plain. Led by the USA Interior Department’s agency, the Bureau of Land Management (BLM), the team claimed that this would enable production of up to 500,000 barrels of oil per day, which it justified due to recent new oil discoveries on the Northern Slope.
The proposal was met with considerable criticism from Democrats who worked on the protection laws, and environmental groups due to the sensitive ecology of Alaska. However, BLM Alaska State Director, Chad Padgett, said in a statement that ‘it was prudent
to develop a new plan that provides greater economic development of our resources while still providing protections for important resources and subsistence access’.
In deep water
Chevron and Total commit to Mexico.
Anchor oilfield in the Gulf of Mexico, USA, has gained approval for platform development by joint owners, French firm Total and American Chevron. The project will call for the drilling of seven subsea wells at 1,500m-deep, which will connect to a semi-submersible floating production unit. The site is estimated to produce up to 75,000 barrels of crude oil per day, as well as 800,000m3 of natural gas. First oil production is expected to be in 2024.
Capital investment required is reported to be US$5.7bln, with the companies having claimed to have reduced the project costs by one-third from the last generation of deepwater Gulf developments through implementing standardisation techniques to replicate existing designs and equipment requirements. Located off the coast of Lousiana, the oilfield is 63% owned by Chevron with the remaining 37% held by Total.
‘The financial investment decision for Anchor…is a tangible example of our strategy to increase our footprint in the deepwater Gulf of Mexico,’ said Total Exploration and Production President Arnaud Breuillac. ‘The Anchor project benefits from reserves with upsides, allowing for a standalone development at a competitive cost.’