LONDON (Reuters) – Top oil and gas companies abruptly slowed their search for new fossil fuel resources last year, data show, as lower energy prices due to the coronavirus crisis triggered spending cuts.
Acquisitions of new onshore and offshore exploration licenses for the top five Western energy giants have fallen to their lowest level in at least five years, according to data from Oslo consultancy Rystad Energy.
The number of exploration licensing rounds fell last year due to the epidemic, while companies such as Exxon Mobil, Royal Dutch Shell and France’s Total also cut spending, said Rystad Energy analyst Palzor Shenga.
“The purchase of additional leases has a cost and requires the fulfillment of work commitments. Therefore, companies would not want to accumulate additional space in their areas of non-core business, ”said Shenga.
(GRAPHIC: Slow Exploration – here)
Of the five companies, BP saw by far the largest decline in new land acquisition in 2020. Bernard Looney, who became BP’s CEO in February, outlined a strategy to reduce oil production by 40% or 1 million barrels per day by 2030. BP has rapidly reduced its exploration team in recent months.
Exxon, the largest energy company in the US, acquired the largest area in 2020 in the group, with 63% in three blocks in Angola, according to Rystad Energy.
Total was the second with two large blocks purchased in Angola and Oman.
Purchasing exploration space means that companies can look for oil and gas. If new resources are discovered in sufficient volumes, companies must decide whether to develop them, an expensive process that can take years.
As a result, the decline in exploration activity could lead to a supply gap in the second half of the decade, analysts said.
(Chart: oil companies spending – here)
Reporting by Ron Bousso; Edited by Alexander Smith