Europe's big oil firms go modest on output despite profiting from energy prices

Europe's big oil firms go modest on output despite profiting from energy prices

/ Oil & Gas / Tuesday, 11 January 2022 05:32

Top oil companies in 2021 have profited greatly from surging oil and gas prices which was not the case last year as the coronavirus pandemic slowed down the global economy. However, big oil companies such as BP, Royal Dutch Shell, TotalEnergies, Equinor and Italy's Eni are focusing on returning as much cash as possible to shareholders as they begin a risky shift towards low-carbon and renewable energy.

The growing pressure from investors, activists and governments to tackle climate change means that European oil giants are turning off the taps on spending on oil even as the outlook for prices and demand remains robust.

Shell sold its Permian shale oil business in the United States for $9.5 billion in September, promising to return $7 billion to investors, underscoring the two-pronged strategy of reducing oil output and boosting shareholder returns.

However, in the US, encouraged by White House calls for more oil output to tackle high energy prices and inflation, the top U.S. oil and gas companies, Exxon Mobil and Chevron, plan to continue ploughing money into new oil projects.

In 2022, European firms are set to return to investors a record $54 billion in dividends and share buybacks, according to analysis by Bernstein, while Exxon and Chevron are set to pay more than $30 billion combined.

As investments in new oil projects dwindle, oil production by Europe's top five energy companies is set to drop by over 15% to below 6 million barrels per day (bpd) by 2030 after reaching a peak of around 7 million bpd in 2025, data from Bernstein Research showed.

With the energy transition entering full swing, investors have welcomed the renewed focus on their returns. Having trailblazed oil and gas extraction for over a century, from drilling in the Middle East to pioneering deepwater production, oil majors have a history of pouring billions of dollars into huge, complex projects which ran over budget and behind schedule, leading to a decade of poor returns after 2010.

Analysts feel that it’s difficult to point out who is right and who is wrong in this dynamic pace of energy transition.

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