A lot of people worried that petroleum will soon dry up during the last decade, and the particular concern did not come true as the improvement in petroleum exploration technology and the oil prices that once surged have prompted petroleum giants to locate additional oil reserves with commercial exploitation values. However, a large population is hoping to see the end of petroleum amidst the trend of carbon reduction during the 21st century, which may eventually come true since low oil prices derived by the COVID-19 pandemic have forced petroleum giants to successively suspend on the exploration of new oil sources.
According to the statistics of Norwegian energy intelligence company Rystad Energy, the quantity of new exploration rights on land and at sea obtained by the 5 major European oil giants has been reduced to the lowest level in 5 years. Exxon Mobil, Royal Dutch Shell, Total, BP, and Chevron have all entered a conservative mode to preserve on cash, and suspended the investment on new exploration projects, as the pandemic impacts the oil prices.
Among these companies, BP has sustained the largest reduction in the quantity of exploration rights, which owes to the 40% decrement in petroleum output proposed by the company during February 2020 that equals to a carbon reduction program which lowers 1 million barrels per day, and a decrease in petroleum output indicates a suspension in exploring for new oil sources. Hence, apart from drastically diminishing on new exploration rights, BP has also been laying off exploration teams in recent months.
For other petroleum giants, the obtainment of new exploration rights not only requires a payment of relevant rights, but also an investment on the exploration, and a decision on exploitation would then need to be made when worthy reserves are discovered, where infrastructures would take years once the decision has been made, while the oil prices must be within the rational range in order to recycle all previous investment. Hence, companies are doing everything they can to preserve on cash to avoid accumulating excessive exploration rights that cannot be converted into cash under the era of low oil prices.
Exxon Mobil had obtained the most new exploration rights in 2020 among the 5 major petroleum leaders, and occupied 63% of rights in three areas of Angola, followed by Total, who had obtained two major exploration rights in Angola and Oman.
The production capacity decrease annually with the extraction of petroleum after oilfield exploitation, so petroleum companies would have to develop new reserves in order to replenish the reduction in production capacity for the oilfields. The depletion in the total production capacity of petroleum will be inevitable as the existing oilfields wither in capacity under insignificant amount of new explorations, which may be a good news for environmentalists who advocate carbon reduction, though it may damage the global economy, since an unbalanced supply of petroleum might occur during the recovery of global economy, and the addition of exploration and exploitation then will require a prolonged period of time that serves no use to the pressing matter.
However, an inflation of petroleum amidst the critical moment of global energy transformation will become a major facilitator in electrification, should it happen owing to the differences in supply, and the demand for petroleum will be terminated if the transition from fossil-fuel vehicles to electric vehicles is proven to be successful, thus it would make sense to let the production volume drop, which prompts petroleum companies to have to transform. The contracted exploration generated by the pandemic may be temporary, but it has provided an early indication in the dusk of the petroleum industry.
(Cover photo source: pixabay)