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Page added on February 2, 2021

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After a Bruising Year, the Oil Industry Confronts a Diminished Future

Business

Big oil companies lost billions in 2020 because of the pandemic and face broad questions about how they will adapt to climate change and regulations.

HOUSTON — Big Oil isn’t so big anymore.

Exxon Mobil, BP and other large oil companies collectively lost tens of billions of dollars last year, posting their worst performance in years and, for some companies, in decades.

The pandemic was largely to blame. It sapped demand for gasoline, diesel and jet fuel as countries and states locked down and people stayed home. But such painful years could become more commonplace as growing concerns about climate change, tighter regulations, and the rise of electric cars and trucks force a reckoning for an industry that has dominated the global economy over much of the last century. General Motors further raised the stakes for the industry last week when it said it aimed to do away with internal combustion engines and sell only electric cars by 2035.

The oil industry is slowly transitioning to a future dominated by cleaner energy. BP, Royal Dutch Shell, Total and other European companies are investing considerable resources in offshore wind and solar energy while cutting back on oil. But those investments are unlikely to pay off for years, maybe even a decade or two.

The American oil majors have been far slower to pivot from fossil fuels, but they are feeling increasing pressure from investors to change their business models. Exxon said this week that it was investing $3 billion in a new business called Low Carbon Solutions, which will initially focus on carbon capture and sequestration projects.

On Tuesday, Exxon reported that it lost $22.4 billion in 2020, compared with a profit of $14.3 billion in 2019. Much of the loss came from a $19.3 billion write-down of assets, including natural gas operations that the company acquired when energy prices were much higher.

And BP said on Tuesday that it lost $5.7 billion last year — its first loss in a decade. The company made a $10 billion profit in 2019. Now the company is cutting at least 10,000 jobs from a work force of about 70,000 people and selling some $25 billion in businesses it decided it didn’t need anymore.

Conoco Phillips, the largest American independent producer, lost $2.7 billion for the year. Chevron said last week that it had lost $5.5 billion, down from a profit of $2.9 billion in 2019.

Still, oil executives tried to strike an optimistic tone when speaking about the future, arguing that their business would bounce back in 2021 as vaccine distribution accelerated and economic activity recovered from the depths of the pandemic.

“We see more opportunity down the road,” Darren W. Woods, Exxon’s chief executive, who normally skips the company’s quarterly conference call with Wall Street analysts, said on the call Tuesday. “I feel good about where we are today. As I look at the first quarter we are already ahead of where we thought we would be.”

Through much of the last year, investors soured on Exxon, and Wall Street was rife with rumors that the company would slash its dividend to preserve cash. The share price had plummeted by roughly half from early last January — sinking as low as $31 in November, its lowest level in nearly 20 years.

But Exxon’s share price has climbed back to about $46, principally because energy prices have recovered strongly in recent weeks. Oil prices are up by nearly 10 percent this year, and the blizzard in the Northeast is driving up natural gas prices because the fuel is used to heat homes and businesses. Exxon’s dividend now appears safe. And aside from the write-downs, Exxon made a small profit in the last three months of the year.

“The industry has been to hell and back,” said Michael C. Lynch, president of Strategic Energy and Economy Research. “They’ve mostly survived the worst circumstances they have ever faced, and it’s all but certain things will look up from here in terms of price and demand.”

Goldman Sachs has predicted that oil prices could rise another $10 a barrel, to as high as $65 by July. That would be a remarkable recovery from prices that languished at less than half that for much of 2020, though it would remain far below prices of a decade or so ago, when a barrel of oil surpassed $140 and oil companies were making record profits.

The industry has suffered repeated shocks in recent years, with prices plummeting during the recession that started in December 2007, again in 2015 when OPEC flooded the market with crude to undercut American production, and last year, when the pandemic took hold.

The industry’s pain forced many companies to lay off employees and cut dividends. Dozens of once high-flying businesses, like Chesapeake Energy, declared bankruptcy in recent years.

Even now, when conditions seem to be improving, the industry’s prospects remain uncertain. Because of the emergence of new coronavirus variants, it is not clear how quickly the United States, Europe and other major economies will get virus spread under control. And then there are the larger questions about climate change.

BP’s chief executive, Bernard Looney, has pushed his company to invest heavily in areas like offshore wind farms and hydrogen production to prepare for a world that uses less oil and gas. But he acknowledged on Tuesday that the payoff from some of these investments might not come until the 2030s and that the company would remain reliant on oil and gas for its profits for some time.

Still, Mr. Looney said in an interview on Tuesday that he welcomed President Biden’s commitment to fighting climate change. The new president has signed executive orders directing the government to raise fuel economy standards and limit new oil and gas drilling on federal lands.

“That is one of the good things about being a company in transition,” Mr. Looney said.

Exxon has taken a different tack. But even its chief executive appeared to acknowledge that the industry was in for more turbulence.

“We don’t know where prices are going to go,” Mr. Woods told analysts. “Our plan is to rebuild the balance sheet so we can be in a position going forward to absorb any shocks that come in the future.”

NY Times

 



27 Comments on "After a Bruising Year, the Oil Industry Confronts a Diminished Future"

  1. DT on Tue, 2nd Feb 2021 8:12 pm 

    “The oil industry is slowly transitioning to a future dominated by cleaner energy. BP, Royal Dutch Shell, Total and other European companies are investing considerable resources in offshore wind and solar energy while cutting back on oil.”

    Wind and solar can never run industrial civilization, because neither can replace diesel,gasoline, aviation fuel and bunker oil for shipping.

  2. Biden's hairplug on Wed, 3rd Feb 2021 2:34 am 

    Jeff Bezos understands the signs of the times, stops delivering packages and goes into “climate change business”, not because he is such a moral guy, but because that’s where the future money is, now that all governments support the Paris Accords and renewable energy transition:

    Never in world history has a new branch of business enjoyed more government support than renewables and everything related to decarbonization. Only fools would stay out of that.

    https://www.aboutamazon.com/news/company-news/email-from-jeff-bezos-to-employees

    “Email from Jeff Bezos to employees”

    Now Bezos can make even more money.

    His Amazon company will be in safe Hungarian-jewish hands:

    https://www.ourdailyupdates.com/andy-jassy-wiki-bio-height-weight-net-wroth-career-qualification-more/

    #AndyJassy

    Intellectual slow lane guys like DT will never understand this. But then again, Bezos is billionaire, where DT operates from moms basement.

  3. DT on Wed, 3rd Feb 2021 6:35 pm 

    “Intellectual slow lane guys like DT will never understand this. But then again, Bezos is billionaire, where DT operates from moms basement.”

    The one thing I do understand is that I never was talking about Bezos in the first place in my comment above nor does the above article even mention Bezos. And my Mom died last year from covid related old age. By the way I do not live in a house with a basement.

  4. Duncan Idaho on Wed, 3rd Feb 2021 8:09 pm 

    They do have interesting expressions:

    https://i2.wp.com/images.dailykos.com/images/866755/story_image/GettyImages-1228806300.jpg?w=780&resize=780%2C&ssl=1

  5. Cloggie on Thu, 4th Feb 2021 4:17 am 

    Netherlands begins preparations for a 4 GW offshore wind park, IJmuiden Ver:

    https://deepresource.wordpress.com/2021/02/04/preparations-4-gw-ijmuiden-ver-wind-park-begins/

    “Yabut…”

  6. Cloggie on Thu, 4th Feb 2021 5:00 am 

    CEO Shell confirms “Peak Oil Demand Shell”. Huge losses oil companies in 2020:

    Shell: 22B
    Exxon: 22B
    BP: 6B

    https://nos.nl/artikel/2367260-coronacrisis-en-oliecrisis-leiden-tot-recordverlies-bij-shell.html

    Shell is firing ca. 8000 people globally. Fewer refineries, less exploration, more selling to consumers, more gas stations (allowing for a quiet, gradual transition from fossil to hydrogen and natural gas, requiring merely smaller adaptions to your petrol pumps, not the location).

    According to CEO van Beurden was 2019 for Shell the peak in marketing fossil fuel products and it will be all downhill from here.

    For the future, Shell eyes trading (wind & solar) power and hydrogen:

    https://www.reuters.com/article/us-shell-strategy-insight/shell-targets-power-trading-and-hydrogen-in-climate-drive-idUSKBN2A10ZZ

    “Shell targets power trading and hydrogen in climate drive”

  7. DT on Thu, 4th Feb 2021 8:27 am 

    Hey cloggie this is a glimpse of Europeans energy transition future. https://www.youtube.com/watch?v=MiKeF1YUKz4

  8. Cloggie on Thu, 4th Feb 2021 9:43 am 

    “Hey cloggie this is a glimpse of Europeans energy transition future.”

    And here is another, just in:

    https://deepresource.wordpress.com/2021/02/04/denmark-approves-10-gw-energy-island-in-north-sea/

    “Denmark Approves 10 GW Energy Island in North Sea”

    The Danish government is ahead of everybody else again, by deciding to go ahead with the construction of an energy island in the North Sea, that will collect up to 10 GW of offshore wind power, before it is transported ashore, either as electricity or hydrogen. The island will be the first among others, to absorb the up to 300 GW offshore wind electricity, as planned by the EU. According to Climate Minister Dan Joergensen, this will be the largest construction project in Danish history.

    While DT is sneering, Europe creates facts.

    Remember DT:

    – renewables can’t exist without fossil
    – hydrogen is not an energy carrier

    ROFL

  9. DT on Thu, 4th Feb 2021 9:54 am 

    Cloggie that energy island video cartoon is yet another example of something that does not exist. Where as my video I posted is of people and cars that do exist. Now tell me who is being more realistic?

    Do you have any examples of wind or solar being produced,built,maintained and decommissioned strictly by using so called green energy? If not, then yes the “sneering” is well directed at your view point sorry to say.

  10. Cloggie on Thu, 4th Feb 2021 10:17 am 

    “Cloggie that energy island video cartoon is yet another example of something that does not exist.”

    What part of “2030” don’t you understand?

    “Do you have any examples of wind or solar being produced, built, maintained and decommissioned strictly by using so called green energy?”

    Germany has currently 50% electricity from renewables. This means that of every wind turbine that is produced in Germany, it is partly produced by renewable energy. Once all energy will be renewable (2050), then a wind turbine will be produced by renewable energy. It is not rocket science.

    Your attitude is: “if it doesn’t exist now, it will never exist”.

    That attitude may be popular in Africa, but not in Europe.

  11. DT on Thu, 4th Feb 2021 10:29 am 

    (Your attitude is: “if it doesn’t exist now, it will never exist”.) Wrong Cloggie, my view is. give me an example of renewable energy devices being replicated by renewable energy devices and providing usable energy for everything else at the same time. The only thing you do is point out pie in the sky predictions off into the future. what is it 10 years out? 20? And how are you so sure about your predictions? My view is predicated upon reality and what is happening now.

  12. DT on Thu, 4th Feb 2021 11:03 am 

    Cloggie this is more clean green renwable sustainable European energy at work in Denmark.

    https://www.youtube.com/watch?v=aniXVSMaekY

  13. Cloggie on Thu, 4th Feb 2021 11:51 am 

    “Cloggie this is more clean green renwable sustainable European energy at work in Denmark.”

    Difficult to take people like you serious.

    Here a “Danish wind farm” (actually build by Danes but in the Netherlands), almost completed and already producing:

    94 Eiffel towers, build in a matter of months:

    https://www.forbes.com/sites/scottcarpenter/2020/11/30/danish-giant-orsted-revs-up-worlds-second-largest-offshore-wind-farm/?sh=285214e5ab64

    “Like 94 Eiffel Towers: Giant Danish Wind Farm Will Be Second-Largest Offshore”

    And all you do is posting childish videos of soap box races as if that describes the impressive Danish renewable energy effort.

    https://www.rechargenews.com/wind/denmark-got-50-of-power-from-wind-and-solar-in-2019/2-1-731183

    “Denmark got 50% of power from wind and solar in 2019”

    Denmark is one of the richest countries in Europe, with a stable grid. By 2030 they are projected to have 100% renewable electricity.

    https://en.wikipedia.org/wiki/Renewable_energy_in_Denmark

  14. DT on Thu, 4th Feb 2021 12:02 pm 

    Cloggie from your first article. “Installation of Borssele 1 & 2 occurred largely during the pandemic. Orsted rammed the first 1000-ton monopiles into the ocean floor in mid-January, shortly before Covid-19 began to spread widely in Europe.” So how much clean green energy was used as “Orsted rammed the first 1000-ton monopiles”?

    Let me guess………………wait for it…………zero.

  15. DT on Thu, 4th Feb 2021 12:06 pm 

    “And all you do is posting childish videos of soap box races as if that describes the impressive Danish renewable energy effort.”

    Cloggie, In the “childish” video those were all adults at the Clean green sustainable renewable soap box derby. And yes the race was very impressive.

  16. DT on Thu, 4th Feb 2021 12:11 pm 

    “Denmark got 50% of power from wind and solar in 2019” Cloggie you might want to add that they got 50% on days when the sun was shinning. None at night nor during the winter months.

  17. DT on Thu, 4th Feb 2021 12:38 pm 

    Watch out Denmark because Croatia is getting on the clean green sustainable renewable bandwagon too! https://www.youtube.com/watch?v=r_eirSAr6F0

  18. Cloggie on Thu, 4th Feb 2021 12:38 pm 

    “Cloggie you might want to add that they got 50% on days when the sun was shinning. None at night nor during the winter months.”

    Yet they have a perfect stable grid.
    Because if the sun doesn’t shine or the win doesn’t blow, they use fossil.

    So what is Denmakr going to do if they no longer have fossil fuel in 2030 for power stations?

    Well…?

    THAT’s where these energy islands from the “cartoons” come in, to produce hydrogen from intermittent wind.

    https://deepresource.wordpress.com/2021/02/04/denmark-approves-10-gw-energy-island-in-north-sea/

    Seriously DT, do you really think that you can think of some serious objection against the Danish/EU-renewable energy strategy, these people with the billions of investment money and science degrees can’t think of themselves?

  19. DT on Thu, 4th Feb 2021 12:42 pm 

    “Seriously DT, do you really think that you can think of some serious objection against the Danish/EU-renewable energy strategy,” Yes Cloggie none of the clean green sustainable renewable energy schemes exist with out the use of copious amounts of FF use. As I have pointed out time and time again but you still choose to ignore this reality.

  20. DT on Thu, 4th Feb 2021 12:54 pm 

    Cloggie Check out this clean green sustainable renewable energy transition happening in Belgrade https://www.youtube.com/watch?v=2iK8HKirT0g

  21. Cloggie on Fri, 5th Feb 2021 12:54 pm 

    Wow, Korea gives the finger to DT and announces a giant 8.2 GW offshore wind park for 36 billion euro:

    https://www.offshorewind.biz/2021/02/05/south-korea-launches-eur-36-billion-offshore-wind-project/

    Completion date 2030.

  22. Cloggie on Fri, 5th Feb 2021 3:05 pm 

    The Spanish energy company Iberdrola just won another 3 GW Irish offshore wind project and now has a staggering pipeline of 30 GW:

    https://www.offshorewind.biz/2021/02/05/iberdrola-adds-three-irish-projects-as-its-offshore-wind-pipeline-tops-30-gw/

    “Iberdrola Adds Three Irish Projects as Its Offshore Wind Pipeline Tops 30 GW”

  23. DT on Fri, 5th Feb 2021 7:47 pm 

    “The Sinan offshore wind project is expected to be completed in phases by 2030 and help create around 120,000 jobs.”

    Cloggie another project 10 years out. Not all that impressive. Now this wind powered van is. https://www.youtube.com/watch?v=MlwK4kCrXB0

  24. DT on Fri, 5th Feb 2021 7:56 pm 

    “Ireland plans to have 5 GW of offshore wind capacity operational by 2030.”

    Cloggie another one ten years out? These projects are starting to sound a lot like fusion energy always 10 years out. Now how about this for innovation and it exists. https://www.youtube.com/watch?v=3sxiIeCaBIc

  25. Biden's hairplug on Sat, 6th Feb 2021 4:12 am 

    Another one ten years out? These projects are starting to sound a lot like fusion energy always 10 years out.

    My God, are you stupid. In contrast to fusion, offshore wind actually exists and many GW’s have already been installed in Europe and the installation speed is picking up exponentially, world-wide (minus the US), now that wind technology is maturing, at a probable end-size of 15-20 MW per turbine and 300-400 m high structures.

    https://spectrum.ieee.org/energy/renewables/wind-turbines-just-keep-getting-bigger-but-theres-a-limit

    It is absolutely clear, why a small, smart vicious tribe could get a hold onto clueless folks like you. Henry Ford and Joseph Kennedy were not enough resistance.

  26. Cloggie on Sat, 6th Feb 2021 4:36 am 

    Even a prominent US energy “thinker” if falling for the same chicken-and-egg “reasoning” as DT, and most other Americans here do:

    https://spectrum.ieee.org/energy/renewables/to-get-wind-power-you-need-oil

    “To Get Wind Power You Need Oil”

    Wind turbines are the most visible symbols of the quest for renewable electricity generation. And yet, although they exploit the wind, which is as free and as green as energy can be, the machines themselves are pure embodiments of fossil fuels.

    In 2021, at the early stages of the renewable energy transition, that is per definition true indeed. But that won’t be true anymore, once all energy will be generated by renewable sources and adequate storage will be in place.

    Smil is a trained scientist and hence is not as stupid as DT…

    https://en.wikipedia.org/wiki/Vaclav_Smil

    Smil completed his undergraduate studies at the Faculty of Natural Sciences of Charles University in Prague… Smil completed a doctorate in Geography at the College of Earth and Mineral Sciences of the Pennsylvania State University

    He is not a physicist and energy engineer. Yet he is seen as a prominent thinker on all matters of energy in the US and is adored by the likes of Bill Gates.

    Smil is smart enough that he doesn’t rule out a 100% renewable energy system categorically:

    For a long time to come—until all energies used to produce wind turbines and photovoltaic cells come from renewable energy sources—modern civilization will remain fundamentally dependent on fossil fuels.

    Dear mr. Smil, that is EXACTLY the purpose of the renewable energy transition: to ensure that all “energies” (sic) come from renewable sources. And if you realize that countries like Germany and Denmark already have 50% of their electricity from renewables and are still economically thriving, you know for a fact that in 30 years time, they will have achieved 200%, the required raw figure to ensure the same level of wealth as today, generated with a 100% renewable energy base. The renewable energy generation problem has essential been solved, critical for the success of the renewable energy transition will be the availability of cheap long-term energy storage. All the signs are that adequate solutions will be found.

    Smil, and in his wake DT-types, are exemplary for the general North-American aversion to abandon the fossil success formula of 150 years and having to embark on a new mode of energy generation, in which they are at a considerable technological distance to their European cousins, where North-Americans love to imagine they have an innate superiority of the exceptionalist variety. And that’s a too comfortable a thought to abandon overnight.

    “That’s OK”, you hear the Europeans think, while they proceed undeterred with conquering the global energy and storage market of the future, increasing their industrial and patent advantage with every passing year.

  27. DT on Sat, 6th Feb 2021 9:46 am 

    “And if you realize that countries like Germany and Denmark already have 50% of their electricity from renewables”

    Cloggie That 50% production is only when the wind is blowing and the sun is shinning. Calling people stupid is a poor, thoughtless and ignorant, non valid argument.

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