Big Oil, a name used to describe the world’s six or seven largest publicly traded oil and gas companies, also known as supermajors, are looking forward to selling $110 billion worth of assets to curb debt and ballooning carbon footprints.
These leading fuel companies will be selling dozens of gas and oil refineries whose total value will be equivalent to almost two years of worldwide oil demand. However, the decision to sell the Big Oil assets has stirred up several questions.
Pandemic-Hit Big Oil Assets To Face Trouble Before Selling
With the world hit by the coronavirus pandemic and the prices of oil and gas uncertain, finding buyers during this time or even striking a deal might be a tricky business. The gradual shift to cleaner energy is also one of the factors that can potentially hinder Big Oil selling spree.
Patrick Pouyanne, Total CEO mentioned on Wednesday that it’s not a good time to sell Big Oil assets. This, he said while presenting a blueprint of the French giant’s strategy to shift to renewable energy on Wednesday.
Among the top oil companies in the world, reportedly, eight of them are likely to sell their assets, approximately equivalent to 68 barrels of natural gas and oil. Some of these companies are namely, Exxon Mobil XOM.N, Royal Dutch Shell RDSa.L, Chevron CVX.N, Total TOTF.PA, BPBP.L, Eni ENI.MI, ConocoPhillips COP.N and Equinor EQNR.OL.
According to market value, these Big Oil assets are worth approximately $111 billion. Rystad Energy, a Norwegian consultancy said in a statement that these assets can serve up to two years of global oil demand.
Big Oil Companies Shift Focus To Renewable Energy Projects
The coronavirus pandemic has caused a lot of upheaval in the oil market, globally. With the decrease in demand caused by global economic and travel shutdowns, the Big Oil prices in April 2020 hit its lowest since 1999. Even though the prices have recovered since then to $40 per barrel, it is not likely to increase dramatically in the next few years.
Analysts from Peel Hunt state that this is a once-in-a-lifetime opportunity for smaller energy companies to pump up their game. It is the time when they can buy Big Oil assets at cheaper prices. Some of the benefiting companies will be Serica Energy SQZ.L, Jadestone Energy M4e.be, and Cairn Energy CNE.L.
In spite of these buyers list, it will be difficult to dispose of such huge assets amidst a pandemic. Plus, with an increasing reluctance to invest in the gas and oil sector, Big Oil companies are focusing on renewable energy projects.
Africa Energy CEO Garrett Soden mentions that lower investments in this Big Oil sector will lead to higher oil prices and tighter supply in the future.