Key events in the oil and gas market in the world
December 1, 2020
Contents
› Key events in the oil and gas market in the world
› Key events in the energy sector of the Republic of Kazakhstan
By the end of the first quarter of 2020 large oil companies decided to reduce investments
According to forecasts of the International Energy Agency, total capital expenditures of oil companies of the world in 2020 will be reduced by 32% compared to 2019 and will approximately amount to $335 billion
Chevron reduced its investment program by 43% from 2019 to $14 billion
ConocoPhillips decided to reduce its investment by 35% to $4.3 billion
PetroChina decided to cut capital expenditures by 30% to $28.3 billion
Equinor reduced its capex by 43-57% or by $3-7 billion from its original 2020 plan
Eni, Pemex, Saudi Aramco decided to cut capital expenditures by 10-11% of the original plan for 2020
Rosneft, Gazprom Neft, LUKOIL planned to reduce investments in oil production by 20% on averageLosses of oil majors in Q2 2020
Shell: profit dropped by 82% with large-scale write-offs of oil and gas assets and a drop in the price of oil, losses of $18.1 billion
ExxonMobil: losses of almost $1.1 billion due to lower prices in the energy market
July 2020: Total wrote off assets for €8.1 billion
August 2020: ExxonMobil reports 20% reduction of its oil and gas reserves
Cuts in the oil and gas industry
In the global oil and gas industry, more than 1 million out of 5 million jobs will be cut by the end of 2020, 13% will lose their jobs due to a price war, and 8% will be due to the slowdown or termination of new projects (forecast by Rystad Energy, March 2020)
In II quarter 2020, Schlumberger paid $1 billion in severance payments to employees as it reduced 25 percent of its global workforce, or 21,000 people
American shale oil and gas companies declared bankruptcies
April 2020: Whiting Petroleum
June 2020: Extraction Oil & Gas; Chesapeake Energy
July 2020: California Resources, a company mainly engaged in traditional oil and gas production, but also owns shale oil fields
Rystad Energy forecast: about 140 US oil and gas companies may declare bankruptcy in 2020
› The coronavirus crisis has accelerated the already established trend to reduce capital expenditures for geological exploration
› The volume of world's recoverable oil reserves is significantly revised downwards due to low production profitability
› With falling prices and production budgets, massive cuts are observed and expected in oil service companies
OPEC+: Meeting of the Joint Ministerial Monitoring Committee (JMMC), August 2020
The aggregate level of implementation of the agreements by the OPEC and non-OPEC countries participating in the OPEC+ agreement at the end of July 2020 was 97%
In IV quarter of 2020, OPEC forecasts that oil consumption will recover to 97% of pre-Pandemic COVID-19 levels
Countries that fail to meet their obligations were to compensate for violations by the end of September 2020. Among them were Iraq, Nigeria, UAE, Russia, Kazakhstan and Angola
From August 2020, the OPEC+ agreement goes on to the 2nd stage of implementation
Brazil does not intend to join the OPEC, but is open to dialogue
October 2019: Brazilian President receives informal invitation to join OPEC from Saudi Arabia's Minister of Energy
January 2020: Brazil has decided not to join OPEC yet,
so as not to hold back production growth by external constraints
Current OPEC+ agreement
China has decided to create the world's largest buyer of oil
June 2020: Bloomberg reported that several Chinese state oil refineries Sinopec, Sinochem, PetroChina and China National Offshore Oil Corporation (CNOOC) were negotiating the formation of a group for joint overseas oil procurement
Total import of the purchase alliance was valued as 5 million bpd
Iraq, Kuwait and UAE announced oil discounts following Saudi Arabia for delivery in October 2020
Despite unfavorable market conditions, Saudi Aramco confirmed its intention to pay $75 billion in dividends, the main shareholder is the Government of Saudi Arabia, August 2020
On December 4, 2019 Saudi Aramco IPO was held, it became the largest in the history of financial markets both in terms of the value of shares sold ($25.6 billion) and the company's capitalization ($1.7 trillion)
Initial plans were ambitious: to place 5% of the company in the Western markets with an estimated $2 trillion, to invest $100 billion in American technology projects
According to the Financial Times, the benchmark for prices from large international buyers was between $1.1 trillion and $1.5 trillion. The Saudi authorities decided to offer in a compressed format: 1.5% of the company listed on the local stock exchange alone, one third of which were physical buyers, valued at $1.7 trillion (forcing local investors to buy shares)
Net profit in the second quarter of 2020 dropped by 73.4%, despite the fact that Saudi Aramco intended to pay out dividends
In fact, Saudi Aramco IPO with a guaranteed dividend amount is more like a bond issue
Saudi Aramco share price change and oil price (to IPO level)
International Energy Agency forecasts on gas
In 2020, global gas consumption may decline by 4-5% (about 150 billion m3, forecast as of June 2020)
Demand for natural gas will gradually recover in 2021
June 2020: the first video conference of the Head of OPEC and the Gas Exporting Countries Forum took place
Construction of Nord Stream-2 is frozen
Uniper, one of Gazprom's financial partners in the Nord Stream-2 project, admitted that the pipeline would not be completed (the Company's report for January-June 2020)
July 2020: USA approves new sanctions against the project
August 2020: EU countries expressed concern about U.S. sanctions against European companies, as third countries should not use sanctions against European companies that conduct legitimate business
Turkey reduced gas imports from Russia and Iran, Azerbaijan is in the lead
Total natural gas imports to Turkey in January-June 2020 decreased by 3.5% compared to the same period in 2019 - up to 22.5 billion m3 (54% pipeline, 46% liquefied natural gas)
Gas supplies from Iran in January-June 2020 decreased by 46% compared to the same period in 2019 – up to 2 billion m3
Supplies from Russia decreased by 41.5% - to 4.7 billion m3 - due to lack of demand for Russian gas in Turkey. Russian gas is being replaced by cheap liquefied gas
Azerbaijan became the largest gas supplier to Turkey in the first half of 2020. The volume of gas purchases increased by 23.4% compared to the same period of last year - up to 5.4 billion m3, which is associated with increased supplies through the Trans-Anatolian gas pipeline (TANAP)
August 2020: the President of Turkey announced the discovery of the Tuna-1 deposit in the Black Sea, the largest in the country's history with a volume of 320 billion cubic meters. Gas production is scheduled to start in 2023
Morgan Stanley will help develop an environmental and financial standard
July 2020: The Partnership for Carbon Accounting Financials (PCAF) announced that Morgan Stanley has joined the unified measurement of financial emissions initiative
Morgan Stanley will also help PCAF develop a global accounting standard that can be used by all financial institutions to measure and reduce their climate impact
Morgan Stanley promises to meet future standards by reducing the share of loans for "dirty" industries, especially coal, as well as in oil and gas projects on the Arctic shelf
BP is transforming into an energy company
August 2020: BP announces new strategy
By 2030, it will reduce oil and gas production by 40% and no longer explore fields in new countries
BP is going to raise the level of energy production from renewable sources to 50 gigawatts
Arctic enterprises are waiting for conversion from oil to liquefied natural gas (LNG)
August 2020: the Public Council of the Russian Ministry of Natural Resources proposed to convert Arctic enterprises from petroleum products to LNG. It may take about 5 years for companies to transform
The issue of usage of oil products in the Arctic became more acute after a large-scale spill of diesel fuel in Norilsk in May 2020
Total aims to transform into an energy company through two segments
September 2020: A new strategy was presented. Total’s strategy aims to transform itself into a broad energy company by profitably growing energy production from LNG and electricity, the two fastest growing energy markets, aiming to create long term value for its shareholders
In the next decade, Total’s energy production will grow by one third, roughly from 3 to 4 Mboe/d, half from LNG, half from electricity, mainly from renewables
Total confirmed its ambition to get to Net Zero (zero emissions balance) by 2050
