Oil majors may be “pushed” to sell or swap more than $100billion of assets due to the energy transition, according to Rystad Energy.
Analysis of BP, Shell, ExxonMobil, Total, Eni, ConocoPhillips, Chevron and Equinor – deemed “Majors+” – shows the move away from fossil fuels could see them sell or swap out resources of up to 68billion barrels of oil equivalent, assets worth an estimated $111bn.
It comes as the transition, and oil price crash, have majors revising their long-term outlooks and the need to streamline their portfolios to “improve cash flow, cost efficiency and competitiveness”.
Rystad said its key criteria in determining whether a major+ will stay in a country are the cash flow over the next five years, potential growth in its portfolio, and presence in key exploration and production growth countries towards 2030.
Based on this, oil majors may “seek to exit 203 positions” in 60 countries, reducing their overall number of country positions from 293 down to 90.
The remaining countries vary from six to 16 per company, while the assets involved cover spending commitments of $20billion in 2021.
Rystad senior vice president, Tore Guldbrandsoy, said: “Companies will look to expand in the prioritised countries through exploration, acquisitions or asset swaps with other Major+ players.
“However, to stay in a country that our criteria exclude, a company may instead seek to grow its local business more aggressively to make sure the portfolio will have a positive and more significant impact on overall performance.”
Most majors will keep a presence in the US, as well as Australia and Canada, however some countries like Argentina (BP), Ghana (Eni), Thailand (Chevron) and Guyana (ExxonMobil) will only have one major present.
In some of these “it could be tempting” for these companies to “stay or increase their presence as the competition may be more limited”.
At the same time, Rystad added, these countries could also be growth targets for companies other than the majors+.
The analysis shows a number of potential deals between the major+ players buying portfolios from each other to boost their position in a key country. For example, BP, Eni and ConocoPhillips could consider buying Indonesian portfolios from Exxon, Total and Shell, Rystad said.
However, cash available for acquisitions “could be limited” in the current market so an alternative could be swaps between the majors between country portfolios.
Rystad said it sees “several” opportunities for this, such as BP swapping its position in Algeria for Eni’s in Australia, or Shell swapping its Norway portfolio for Total’s in Oman