What is the future for the oil sector in light of...

What is the future for the oil sector in light of...
What is the future for the oil sector in light of...

London – AFP: The Covid-19 epidemic, which plunged oil demand and pushed its prices sharply lower, has resulted in heavy losses for the giant oil companies, which find themselves forced to reduce their exploration and exploration activities significantly.
And with the shift to environmentally friendly renewable energy sources, which would push the demand for oil further down in the long run, the outlook for an entire sector is bleak.

Prospecting activities decline

“The oil exploration operations have taken a heavy blow this year with the collapse in demand, prices and oil due to the global pandemic,” sums up Stephen Brennock, an analyst at the consultancy BVM.
In the North Sea, exploration activities decreased by 70% in the UK’s waters, and 30% in Norway, compared to the plans that were planned before the crisis, according to a study by the Westwood Center on Energy published late last month.
The American “Exxon Mobil” company reduced by 30%, equivalent to at least $ 10 billion, its investments, especially in the field of oil exploration and exploration. Italian Eni, Britain’s BP, Norwegian Aikenor and Saudi have also reduced their activities.
The companies dealing with the giant energy companies are also paying a high price, as is the French “CGG” group, which works in the field of analyzing subsoil resources, which expects this year a 40% decline in its turnover.
On the other side of the Atlantic, more than 30 exploration and production companies have been bankrupt in the United States since the start of the year, according to the Texas law firm, Heinz and Bone.
As the price of West Texas Intermediate crude remains stuck at $ 40 a barrel for a long time, 150 other companies may join it by the end of 2020, according to analysts’ estimates from the Norwegian consultancy Rystad Energy.
“The markets are no longer pinning their hopes on the future of oil,” says Pjarn Schildrup, an analyst at SEEP Brokerage, adding, “Without a potential growth in oil exploration, what can the sector do?” He answers the question, saying, “Focus on profitability with less spending.”
Rafaella Hein of GBC Energy is more optimistic. She expects that “outside the United States, where things take longer, exploration programs will resume in all major supply areas and will approach pre-crisis levels in the next world.”
“In the past, we saw that the huge cuts in spending in the budgets of the big companies did not really affect their future production, because the search for new fields is, to a lesser extent, a matter of survival,” she adds.
But the fight against climate change caused by global warming changes the picture, as the British company “BP” and other companies consider that oil demand in the world has already reached its peak and will not stop its decline from now on.
According to the “Westwood” Center for Energy Studies, and despite the changes that have been taken towards producing more environmentally friendly energies, the plans for the method of large companies show that the appetite for exploration still exists, but it collides with weak crude prices.
Brent and WTI prices fell in an unprecedented way in March and April, and appear to be stuck at around $ 40 a barrel, which is too low to allow many of the players in the sector, especially Americans, to achieve a commensurate rate of return.

Exploration projects in the Arctic Ocean

On the other hand, there are emerging exploration projects, such as in the Arctic Ocean, which is believed to contain 13% of the oil reserves and 30% of the undiscovered natural gas reserves in the world, a task that has become easier with the rapid retreat of the ice cover.
And the Russian “Gazpromneft” company and the English-Dutch “Shell” announced their alliance in July to explore and explore the Arctic Peninsula.
For its part, Donald ’s government approved a bill in August that opens the way for oil derivatives exploration in the largest natural reserve in the United States, in Alaska.
The exploration project includes a coastal area of ​​about 70,000 square kilometers, equivalent to the size of Ireland, along the Arctic Ocean.
Hain believes that these projects “are not economically sustainable, and the current crisis makes them more difficult to achieve” even though “political will may outweigh these considerations.”

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