Oil majors seek new oil fields outside the Middle East

Exxon Mobil, Chevron, and BP are pouring billions of dollars into finding new oil and gas fields in regions that carry less risk from the conflict in the Middle East. Iranian attacks on energy infrastructure in the region and chokepoints in the Persian Gulf have sparked a global hunt for oil. Some Western oil majors have posted multi-billion-dollar revenue losses due to the conflict. Yet sharply higher energy prices are delivering large cash flow to the oil industry, enabling them to expand into areas that were previously hard to access or abandoned. WTI crude traded around $90 per barrel, well above the more than $60 level seen before the conflict began. Oil prices had fallen sharply on April 17 after Trump and Iranian officials announced the Hormuz Strait was reopened, but rose again on April 20 when Iran again closed the strait. Exxon recently outlined a plan to invest up to $24 billion in deep-water oil fields off Nigeria. Chevron is expanding its presence in Venezuela. BP is buying stakes in offshore blocks off Namibia, while TotalEnergies signed a exploration deal with Turkey. Wood Mackenzie estimates the major oil groups could create about $120 billion in economic value from exploration activities in the coming years. [Image: A car passes a BP gas station in Liverpool, UK, February 2023. Photo: Reuters] At a April 16 meeting with Exxon, Chevron and other oil executives, US Energy Secretary Chris Wright and Interior Secretary Doug Burgum urged companies to keep increasing output to help cap prices, given the risk of global supply shortfalls. The WSJ, citing sources, says oil companies also want to maximize production to take advantage of higher prices. But activity must stay within budget limits to avoid large-scale investment costs. Overall, major oil companies spent an average of $19 billion per year on exploration worldwide during 2021-2025, Wood Mackenzie says. Industry leaders are focusing on a longer-term objective: to find enough oil and gas to sustain profits through 2030. The closure of the Hormuz Strait has caused the world to lose roughly 20% of oil and LNG supply. Some Western companies operating in the region have suffered significant damage. Exxon said the conflict reduced its output by 6% in Q1. The company faces an annual revenue loss of about $5 billion if Qatar's gas facilities are damaged. Its partner QatarEnergy estimates repairs could take up to five years. Analysts say the industry is currently shifting away from the Persian Gulf. Just days before the conflict erupted, Chevron announced exclusive negotiations with Basra Oil of Iraq to buy a stake in West Qurna 2—one of the world's largest onshore oil fields. However, analysts assess that Western firms are unlikely to sign major deals in the Middle East until the conflict is fully resolved. The economic impact of the war also prompts companies to diversify portfolios and spread risk globally. According to Wood Mackenzie, the global oil and gas industry needs to discover new resources, with a proven reserve of about 300 billion barrels, to meet demand through 2050. Exxon, Chevron, Shell, BP and TotalEnergies are targeting new drilling opportunities in Africa, South America, and the eastern Mediterranean to add to reserves for the next decade. Last week, Exxon took another step in its plan to drill offshore Greece. In recent months, the company signed preliminary exploration deals with Iraq, Turkey and Gabon. In Trinidad and Tobago, the company is also exploring for oil and gas in deep water. The international operations cost Exxon about $9 billion last year. Chevron is also expanding its exploration business. Last year, they acquired Hess for $53 billion. The company appointed Kevin McLachlan — former TotalEnergies executive — as Vice President of Exploration. Chevron plans to spend $7 billion on offshore projects worldwide this year. The White House is also pushing US oil majors to boost investment in Venezuela's oil sector. However, most firms remain cautious after years of decline in the region due to weak management. Chevron is now the largest foreign investor in Venezuela. Reuters reported last week that they reached an asset-swap agreement to expand operations there. Venezuela has heavy oil reserves, valued by US refineries. PDVSA, the state oil company, sold another 13% stake in a joint venture to Chevron. Another project in which Chevron holds 30% has been granted development rights. Chevron plans to explore in Egypt this year. Previously, they were granted four offshore licenses near Greece and a block in Libya. Oil prices are expected to stay high in the coming months, even if Hormuz bottlenecks are resolved. “High oil prices for an extended period are the best driver for exploration activity. In the medium-to-long term, the price of a barrel from the Persian Gulf will need to reflect added risk premia. This will further push companies toward new exploration areas,” said Schreiner Parker of Rystad Energy. Hà Thu (according to Reuters, WSJ).