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An Industry expert and writer for Oilprice.com, Irina Slav, has aired her views on the outlook of the year 2023 for the industry sector.
According to her, “Chances are that 2023 will be another strong year for the oil industry simply because those companies came in strong into the new year and demand for oil and gas is not expected to fall—on the contrary.”
This prediction was arrived at after a careful analysis of the major firms in the world.
Slav agreed that last year was not a perfect year but the industry did not perform as badly, despite predictions of its looming demise as renewable energy leads to electrification that in turn leads to the death of oil, fossil fuels were the stars of the year, with demand for all, including coal, notably rising. In her submissions, “opposition to Big Oil grew louder and protests turned more extreme, with activists gluing themselves to streets and buildings, and vandalizing world-famous works of art in order to raise awareness of climate change.”
“Oblivious to this rise in the amount of activism, Big Oil went on to rake in record profits thanks to higher prices for the commodities it produces. Big Oil majors will report combined earnings of close to $200 billion for 2022, with many of the supermajors booking record quarterly profits during the year thanks to the combination of strong demand for energy and limited supply.”
Another gain was the reduction in the debts of Big Oil by over 50% to about $100 billion fom $270 billion. This feat was attained thanks to the strong performance of its products in the past year.
How Are The Big Iol Faring?
Irina Slav writes…
“But it’s not all smooth sailing from here on out. First, there is the windfall profit tax that the EU and the UK decided to impose on energy companies in order to generate some money for its energy aid programs.
Shell said it expected the effect of the UK and EU windfall taxes will cost it $2.4 billion. It also said it may have to reconsider investment plans for the North Sea in light of that hit. Meanwhile, despite political opposition to developing more oil and gas reserves in the UK, more than 100 bids were submitted this month for new exploration in the basin.
French TotalEnergies also said it would take a substantial hit from windfall taxes in the UK and the EU. According to the supermajor, it would come in at about $2.1 billion. As a result, the company said it will reduce its investments in the North Sea by a quarter, noting that the levy did not provide for any adjustments in case oil and gas prices fell.
Exxon took it a step beyond criticism, filing a lawsuit against the European Union to get it to drop the windfall tax. The company argued that the tax is counterproductive, would discourage investments and undermine investor confidence.”
However, Big Oil has some big investment plans. Excerpts from Slav’s text “BP will be spending more on its U.S. shale and Gulf of Mexico operations even though European supermajors as a whole are expected to be more cautious with their money because of the windfall taxes. But they will continue spending heavily on low-carbon projects.
“The European majors appear much more attractively valued than the U.S. majors on our estimates,” HSBC said in a recent note quoted by Reuters. It is among banks that predict stronger share performance for European Big Oil majors after last year U.S. supermajors ruled the stock market.
If investment in low-carbon projects is the guarantee for stronger share performance, then HSBC is right. Indeed, pressure is growing on the oil industry to set itself more stringent emission-reduction targets and make stronger commitments to decarbonize. This pressure is unlikely to let up this year as governments in the EU, the UK, and the U.S. double down on their climate change plans, too.”
As already mentioned, 2023 is looking good for the indusrty in general. Slav sums it up this way:
“The EU will need to buy more gas to refill its storage and it will continue using oil products that it no longer buys from Russia. China is reopening and most observers expect a rebound in oil and gas demand to come sooner rather than later. Even the U.S., for all its green ambitions, is unlikely to stop being the biggest consumer of oil in months. The immediate future of Big Oil is certainly bright.”
Source: Oilprice
