In a bold move that underscores their commitment to the future of fossil fuels, the two largest American oil companies, Chevron and ExxonMobil, have embarked on a race to secure petroleum reserves, defying predictions that global oil demand will peak by 2030. These multibillion-dollar transactions have set the stage for a seismic shift in the energy industry.
Chevron made headlines on Monday with its announcement of its largest-ever acquisition: a staggering $53 billion deal to acquire US operator Hess. This acquisition grants Chevron a significant foothold in oil production off the coast of Guyana, where the industry’s most significant discovery of the past decade lies.
This announcement came less than two weeks after ExxonMobil, another US supermajor, unveiled its own massive $60 billion takeover of Pioneer Natural Resources. Pioneer is the largest operator in the world’s most prolific oilfield, the Permian Basin of Texas and New Mexico.
The scale of these deals harks back to the megamergers of the late 1990s and early 2000s, such as BP-Amoco, Exxon-Mobil, and Chevron-Texaco, which formed the modern supermajors. Industry analysts and dealmakers anticipate that more such transactions are on the horizon as companies vie to gain scale and secure the best drilling sites to produce the lowest-cost barrels.
These acquisitions represent a significant bet on the longevity of fossil fuel demand, even as organizations like the International Energy Agency project that demand will peak before 2030. Chevron’s CEO, Mike Wirth, asserted, “We live in the real world and have to allocate capital to meet real-world demands.” He predicted that demand for oil “will continue to grow to 2030 and beyond.”
Globally, a total of $254 billion worth of merger and acquisition deals in the oil and gas sector have been announced this year, marking the highest year-to-date total since 2014, according to LSEG.
Industry insiders describe this flurry of activity as an “arms race,” with Chevron and ExxonMobil taking bold steps to secure their positions. Speculation about potential tie-ups has also emerged, with analysts pointing to the possibility of a merger between BP and Shell. However, significant obstacles remain on the path to such a deal, and there have been no official discussions reported.
One key difference between the US supermajors and their European counterparts is their commitment to future oil production. While Exxon and Chevron have not ventured into renewables, preferring “molecules rather than electrons,” European majors have embraced green energy initiatives, making a significant oil deal more challenging.
Analysts and investors believe that BP and Shell could be at risk of being left behind if they do not make strategic moves to compete with the recent acquisitions by Exxon and Chevron. However, the timing may not be right for such a deal, as Shell’s CEO, Wael Sawan, is relatively new to his role.
While BP declined to comment on speculation, Shell also chose not to comment. Other European majors, including TotalEnergies and Eni, may explore their options, but national pressures could complicate large-scale deals.
In the US shale exploration and production sector, analysts predict that larger companies may consolidate among themselves, creating attractive targets for supermajor buyouts in the future. Companies like Occidental Petroleum, ConocoPhillips, and Marathon Oil are among those expected to make moves in this direction.
Despite the recent deals, experts believe that Exxon and Chevron are not done with their acquisitions. The shale industry, in particular, is expected to witness further consolidation in the coming years.
While these deals may appear reactionary, Chevron’s CEO, Mike Wirth, emphasised that the discussions leading to the Hess acquisition had been underway well before the announcement of Exxon’s takeover of Pioneer Natural Resources. These deals reflect the determination of these giants to secure their positions in an evolving energy landscape.
The future of the energy industry remains uncertain, with competing visions of decarbonisation and continued fossil fuel reliance. As oil companies make bold moves to secure reserves and production capabilities, the stakes are higher than ever in this fast-paced race for dominance in the global energy market.