The new year began on a hopeful note for the industry, with the Brent crude price rising to just under $70, having clawed back ground after the crash of 2014. There were some exploration successes to brag about too, notably Apache’s Maka Central oil and gas condensate discovery offshore Suriname, which extended the prolific Liza trend eastward from Guyana. More finds would follow but the early January oil price would turn out to be the peak for the year.
In an early sign that the company would be changing, incoming BP chief executive Bernard Looney took to social media to “listen and understand [the] thoughts, concerns and interests” of the wider public. The task would be a challenge in the months ahead as Looney, who took over from Bob Dudley, set the company on an aggressive path to carbon neutrality, generating a lot of news, intense public scrutiny and more than a few Upstream cartoons in 2020.
Amazon chief Jeff Bezos made an astonishing pledge of $10 billion to help fight climate change — and immediately came under environmental activists’ fire for the tech giant’s ties to the oil and gas industry, much of which uses the company’s advanced computing technology. The dustup would be repeated at other companies as stakeholders, including the public, adopted more aggressive tactics to push green agendas.
Oil futures took a sharp dive as tensions rose in a standoff between Saudi Arabia and Russia over production cuts. Saudi Arabia threatened to flood an already oversupplied market following the collapse of talks with Opec+ member Russia as the group struggled to prop up oil prices. At this point, the scale of the coronavirus outbreak — and a corresponding drop in demand for oil — was becoming clearer, rattling markets.
Opec+ reached an agreement to slash production by 9.7 million barrels per day to stabilise falling oil prices, but a rally fizzled when Mexico baulked at its proposed output cuts. Some quick diplomacy by the US helped rescue the agreement but it wasn’t enough to prevent a further price slide as demand continued to drop — in part because the Covid-19 pandemic forced industry gatherings to go virtual.
Remote operations took on another layer of meaning as much of the global workforce abandoned offices for makeshift workspaces at home. The working-from-home trend came with its challenges — especially if there was a toddler or two around — but “WFH” is likely to continue for many people even after the threat of the coronavirus has largely passed, as both employers and employees realise some benefits.
The oil price was a frequent topic in Upstream articles and commentary throughout 2020. Crude prices, hit by plunging demand, largely defied efforts to keep them propped up. Despite a historic Opec+ agreement to cut daily production by nearly 10 million barrels, prices plummeted in April, with West Texas Intermediate briefly falling to minus $37.63 per barrel. The shocks would have devastating — and likely lasting — effects on the industry.
The US shale patch took a lot of punches in 2020 as the pandemic spread and worldwide demand for oil languished. Onshore drilling activity in the US fell precipitously in the spring with no clear road to recovery in sight. The following months saw interest cool in the once-hot shale basins but some companies took advantage of the downturn to strike deals, fuelling a wave of mergers and acquisitions.
An industry report said “awkward” assets in ExxonMobil’s upstream portfolio made it less resilient than its peers as oil prices remained in the doldrums. Number 1 on the Fortune 500 list scarcely a decade earlier, in August the supermajor fell off the Dow Jones Industrial Average. Later in the year, ExxonMobil would announce massive writedowns, mostly targeting its unconventional gas assets in the US.
The oil price was back in the news in June as the market dealt with mixed signals from Washington about the state of an ongoing US-China trade dispute. Assurances from the White House that trade relations with China remained “fully intact” were at odds with earlier remarks by an administration official that sent the markets tumbling. Oil prices gained ground as summer arrived but waters remained choppy.
No one likes to be the bearer of bad news but industry executives increasingly found themselves in that role this year. The second quarter was especially dire for many, with ExxonMobil and Anglo-Dutch supermajor Shell both issuing early warnings to investors. The former would go on to post its second consecutive quarterly loss around the time Shell reported a quarterly loss of $18.1 billion on massive writedowns.
BP’s Bernard Looney spent his first several months as chief executive reassuring investors that the venerable UK company had the right recipe to create what he calls an ‘integrated energy company’ with a portfolio rich in low-carbon assets. BP's annual spending on low-emission energy is set to increase to about $5 billion by 2030.
Turkey landed a huge gas discovery at the Tuna-1 well in the Black Sea — up to 405 billion cubic metres, according to President Recep Tayyip Erdogan. But it will likely need expertise and investment from foreign players to bring the find online. Erdogan was drawing international criticism, meanwhile, for the country’s controversial exploration and drilling activities in East Mediterranean waters claimed by Greece and Cyprus.
Around the time France’s Total was celebrating its Brulpadda find with more South Africa exploration, ExxonMobil and Norway’s Equinor said they would be taking their leave of the country to focus on core parts of their portfolios. In late October, Total announced another “significant” South African gas discovery at the Liuperd (Leopard) prospect. The company also has its eye on deep-water opportunities in Namibia and Angola.
Oil-market predictions are notoriously difficult but there is no shortage of analysis these days around peak demand, as the shift away from fossil fuels gathers momentum. While most agree that gas demand will grow, the outlook for oil varies. BP and Total this year said demand could plateau by 2030, while International Energy Agency executive director Fatih Birol said that would depend on a major shift in government policies.
Joe Biden and running mate Kamala Harris emerged victorious in the US presidential election, signalling a major shift in the nation’s energy policy. Biden has vowed to spend some $1.7 trillion over 10 years to promote clean energy technologies, return the US to the Paris Agreement and restore some Obama-era regulations weakened by President Donald Trump — who as of mid-December still had not conceded defeat.
As the year drew to a close, there was good news from multiple pharmaceutical firms about the effectiveness of their respective Covid-19 vaccines — an astonishing achievement considering less than a year had elapsed since the first outbreak of the novel coronavirus. The news offered a bit of light at the end of 2020’s dark tunnel, and markets reacted accordingly, with the oil price steadily rising in late November to just under $50 per barrel.
ExxonMobil was back in the news at the end of November as the company announced impairments of up to $20 billion on its dry gas assets, and chief executive Darren Woods found himself, like many of his industry peers, playing defence once again. We imagined Woods seeking a little inner peace and tranquility — something we could all use as the year comes to an end. Here’s hoping for a safe and prosperous 2021.