Date: 2023-12-01 Source: China Petrochemical News

At the end of October, Chevron, the second largest oil company in the United States, announced that it would pay $53 billion for the all-share acquisition of U.S. oil and gas producer Hess Corporation, which is another large acquisition in the U.S. oil and gas industry after Exxon Mobil, the largest oil company in the United States, announced in mid-October that it would pay $59.5 billion to acquire U.S. shale oil and gas producer Pioneer Natural Resources.

Within a month, two of the largest oil companies in the United States have announced their biggest acquisitions to date, giving the market more attention to the prospects of the oil and gas industry. Industry insiders believe that these two blockbuster acquisitions, with a total value of more than $100 billion, indicate that the oil and gas industry is about to usher in a new round of consolidation.

It is understood that Chevron's acquisition of Hess, including the latter's debt, the acquisition is valued at $60 billion, is expected to be completed in the first half of 2024. Exxonmobil's acquisition of Pioneer Natural Resources, valued at up to $64 billion including Pioneer's debt, is also expected to close in the first half of 2024.

Exxonmobil has further refreshed its presence in the Permian Basin, the largest shale area in the United States, with the purchase of Pioneer Natural Resources, which will produce 1.3 million barrels of oil equivalent per day. Chevron has further renewed its presence in emerging oil producer Guyana with the acquisition of Hess, which owns about 30 percent of Guyana's Starbrook block, covering 6.6 million acres and containing about 11 billion barrels of oil equivalent, as well as 465,000 acres of exploration in North Dakota's Bakken shale. After the acquisition, Chevron's oil and gas production will increase by more than 10%.

According to the U.S. Energy Information Administration (EIA), Guyana's oil and gas production surged to 260,000 barrels of oil equivalent per day in 2022 and is expected to approach 480,000 barrels of oil equivalent per day in 2024. Wood Mackenzie, an energy consultancy, expects Guyana to produce 1.5m barrels a day by 2033, potentially higher than many Opec producers.

Wood Mackenzie analyst Alex said, "Previously, Chevron's oil assets were mainly concentrated in the Permian Basin, and the acquisition of Hess will help diversify its oil portfolio." "Compared to Exxon Mobil and European energy companies, Chevron is underweighted in deepwater assets and has always sought to diversify potential risks."

Commenting on the continued expansion of its oil and gas footprint, Chevron CEO Mike Voss said: "The International Energy Agency (IEA) expects fossil fuel demand to peak in 2030, but we don't see it that way. We will continue to align our businesses and products to meet global energy demand."

Demand is expected to remain strong going forward

As the world accelerates its green transition, dependence on fossil fuels is decreasing and uncertainty in the oil and gas industry is increasing. Even so, ExxonMobil and Chevron remain confident that medium - to long-term oil and gas demand resilience remains and that global fossil fuel demand will continue to grow strongly over the next few decades.

This is in stark contrast to European energy giants such as bp and Shell, which are significantly increasing their investments in green energy and innovative technologies. According to the US CNBC News network reported that compared with the US energy companies, European energy companies are more vulnerable to the increasingly stringent emissions regulations of the European Union, which makes them have to increase the layout of green energy business.

According to Opec's latest forecasts, global oil demand will rise 15 per cent between now and 2045, to 116m barrels a day.

Sean Hiatt, director of the Energy Transition Initiative at the Marshall School of Business at the University of Southern California, believes oil and gas demand will not collapse, especially in Africa and Asia, where the population is growing in steps. In fact, while oil and gas demand in Europe and North America is likely to decrease, a complete reduction to zero is unlikely.

Hiatt stressed that "compared to clean energy, oil and gas are relatively cheap and easy to transport and store. "While electric vehicles are growing in popularity, this is only one part of the transportation sector, which relies more on fossil fuels, such as aviation and shipping, where demand for fossil fuels remains high."

Ben Cahill, a senior fellow in the Energy Security and Climate Change program at the Center for Strategic and International Studies, a nonprofit policy research organization, agreed that there is an ongoing debate about "peak oil demand," but as of now, global oil consumption is still "pretty substantial."

Compete for the best oil and gas assets to secure future supply

It is worth mentioning that this is Chevron's second high-profile acquisition this year. In August, Chevron completed its acquisition of U.S. shale producer PDC Energy, a $6.3 billion deal that added at least 1 billion barrels of oil equivalent to its proven oil and gas reserves.

Regarding this year's series of blockbuster acquisitions, Voss bluntly said: "The oil industry is entering a new phase of consolidation. There should be some consolidation in our industry, especially as we move into shale. Across the industry, there are too many companies involved upstream, and it is time to 'sort it out'."

The two largest oil and gas companies in the United States continue to expand their upstream business territory, and in the context of high oil prices and tight supply, more and more energy companies will step up their competition for the best oil and gas assets to ensure stable supply for decades to come.

Larry Goldstein, former president of the Petroleum Industry Research Foundation, said, "The big companies don't see oil demand falling in the short term, at least for the next 20, 25 years, oil demand is still strong."

The big acquisitions by ExxonMobil and Chevron are seen as a sign that energy markets are entering a new era of increased uncertainty. If the overall green transition slows, fossil fuels, led by oil and gas, will still play a key role in the medium to long term, which means that whoever has the fastest oil and gas reserves to come on stream, who can achieve low oil and gas production volume, who has the ability and confidence to cope with volatile energy markets, this operational flexibility is attractive in a volatile price environment.

Chevron considers sale of Haynesville shale assets

According to the Oil price network reported that after the large-scale acquisition of Hess Corporation, Chevron is considering selling assets in the Haynesville shale area of east Texas. Reuters quoted sources as saying the company was also considering other options for the assets. Some of Chevron's assets produce about 40 million cubic feet of natural gas per day, the sources said.

Chevron plans to divest $15bn worth of assets over the next five years after a series of acquisitions added 700,000 acres to its shale block and 500,000 barrels a day of production. The Haynesville shale area, with an estimated 304 trillion cubic feet of technically recoverable natural gas reserves, is also close to the Gulf Coast and the region's liquefied natural gas (LNG) terminals. Strong expectations for LNG demand have spurred a boom in U.S. LNG capacity construction, with North American LNG production expected to double to 24.3 billion cubic feet per day by 2027.

At the same time, Chevron's business in the international oil sector is also growing. The $53 billion acquisition of Hess Corporation gave it access to Guyana to share its oil wealth. In Guyana, Hess is ExxonMobil's partner in the Starbrook block, where 12 major discoveries have been made.

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