International oil companies are transforming carefully

Since 2021, affected by the rapid recovery of oil and gas market demand and geopolitical conflicts, oil and gas prices have increased significantly, and the operating performance of oil companies has improved
significantly.
Despite this, international oil majors are still maintaining a prudent transition strategy
in the face of global decarbonization in response to climate change.
Under the premise of adhering to the main oil and gas industry, international oil majors have gradually reduced upstream investment and steadily promoted the development of
low-carbon renewable energy.
In addition, national oil companies and independent oil companies have maintained a prudent but aggressive transition strategy
.

Giants cut upstream investment

Since 2021, international oil majors have continued to carry out oil and gas exploration business
.
Overall, however, the total upstream investment of oil majors is gradually declining
.

ExxonMobil has been one of the most active players in exploration in the oil and gas industry, looking for low-cost oil and gas projects around the world, with a particular focus on deepwater projects
.
Since 2021, the company has continued to focus on the deepwater sector, with another six oil and gas discoveries
in Guyana.
On the development side, ExxonMobil is involved in deepwater oil and gas, unconventional oil and gas, liquefied natural gas (LNG) and conventional oil and gas
.

Unlike Exxon, other companies are cutting back on
exploration.
Since 2020, BP has proposed not to carry out exploration business in new countries, and future exploration will focus on the periphery of existing production areas to obtain development opportunities with shorter cycles, lower costs and faster returns, and exploration capital expenditure has also been significantly reduced
.
After Shell announced its "Enabling Progress" low-carbon development strategy and acquired British Gas, it has significantly cut exploration spending, while gradually exiting high-risk, long-term frontier basins and investing more in the core
.
Total Energies also reduced exploration spending
after the name change.
Constrained by OPEC+ quota changes, asset sales, and natural decline in oil and gas, Total Energies' oil and gas production in 2021 was even 2%
lower than in 2020.
Chevron has also withdrawn from exploration operations in other countries and has instead strengthened its unconventional oil and gas business
in the Americas, represented by the Permian Basin of the United States.

Overall, after 2020, the upstream investment of international oil companies will operate
at a low level.
Despite the surge in energy prices since 2021, the general direction of oil and gas companies to cut upstream investment has not changed
.
Market participants believe that this is related to the decline in global long-term demand potential and the low-carbon transformation of oil companies, and this trend is expected to become more obvious in the future, and the low level of investment in traditional upstream business may become the
new normal.

Low-carbon investment continues to increase

Judging from the future investment plans released by international oil majors, investment in the low-carbon sector continues to grow
.
BP plans to invest US$14 billion ~ US$16 billion in 2022~2025, of which the investment in low-carbon business areas such as low-carbon power and energy, convenience retail and mobility will reach US$5 billion ~ US$7 billion
.
Total Energies plans to invest $13 billion ~ $15 billion in 2022~2025, of which LNG, new energy and power and other fields will invest about $6.
5 billion, accounting for almost half of
the total investment scale.

Except for Total Energies, whose future oil and gas production is expected to continue to grow until around 2027, the remaining European international oil companies have very little room for oil and gas production growth, and most of them show a steady downward trend
.
North American international oil companies are different, their oil and gas production still has a lot of room and cycle in the future, especially ExxonMobil plans to continue to expand oil and gas production until
2030.

In addition, in the process of responding to climate change and promoting energy transformation and corporate transformation, natural gas as a low-carbon energy source has received further attention
from international oil companies.
For example, Eni proposed that the proportion of natural gas production should be increased to 60% in 2030 and 85%
in 2050.
BP has identified natural gas as the first priority for business transformation and development, and natural gas will account for more than
60% of its total oil and gas business by 2025.
International oil majors will also vigorously increase the proportion
of LNG production in natural gas.
Market participants expect that by 2030, the LNG production of Shell, ExxonMobil, Chevron and Total Energies will account for 25%~35%
of the total natural gas production.

Investment strategies are more prudent

Since 2021, national oil companies have also begun to propose their own carbon reduction or carbon neutrality goals
.
From the perspective of emission reduction paths, NOCs are most concerned about achieving low-carbon development
by vigorously developing natural gas and expanding carbon capture, utilization and storage (CCUS).
Specifically, Petronas, Petrobras, Abu Dhabi National Oil Company and Qatar Petroleum have all proposed CCUS development plans
.
In terms of natural gas, national oil companies have set targets
for increasing the proportion of natural gas production.

Independent oil companies, represented by unconventional companies in North America, began to focus on generating profits rather than scaling up
.
Independent oil companies are beginning to show a more cautious approach to all types of investment operations, which is very different
from the situation before the coronavirus pandemic.
In 2021, affected by the soaring oil and gas prices, the operating cash flow of nine independent oil companies of Natural Resources Canada, ConocoPhillips, Ioger, Hess, Marathon Oil, Occidental Petroleum, Sencor, Tharlow and Woodside all recovered, reaching an average of US$7.
524 billion, an increase of 169.
5%
over 2020.
However, the increase in upstream oil and gas spending was much smaller, with nine independent oil companies spending an average of US$6.
616 billion
upstream in 2021.
This slow-growing oil and gas spending reflects a more prudent investment strategy
for independent oil companies in the context of uncertain market conditions.