Exxon, Chevron make big oil acquisitions in the face of uncertain future for fossil fuels

Oil giants Exxon Mobil and Chevron recently announced major acquisitions of oil companies and expanded their oil and gas assets.

Some analysts see these acquisitions as big bets on our fossil fuel future, while others say the moves could be seen as consolidation in an industry that may be in decline. It is claimed that there is.

These conflicting readings come amid similarly contradictory predictions about the future of fossil fuels more broadly. The International Energy Agency predicted this week that fossil fuels could peak this decade, while US forecasters recently said global energy emissions will rise until mid-century.

Regardless of broader questions, energy companies touted the deal as good for business.

Exxon announced this month that it would buy oil and gas producer Pioneer Natural Resources for about $60 million.

The move expands Exxon’s footprint in the Permian Basin, an oil and gas producing region in west Texas and southeastern New Mexico. The company announced that production in the basin will more than double, to the equivalent of 1.3 million barrels per day.

The company said in a press release that the move “could potentially generate double-digit revenues by recovering more energy.”

Chevron announced this week that it would buy Hess, the oil and gas producer also known for its toy trucks, for $53 million.

Chevron’s press release touted Hess’ positions in Guyana and the Bakken (an oil-producing region in North Dakota and Montana).

Fernando Valle, senior analyst at Bloomberg Intelligence, said the two acquisitions represent Exxon and Chevron doubling down on their oil operations.

He said the deal shows Exxon and Chevron don’t believe peak oil will arrive as quickly as reports that say peak oil could arrive within 10 years predict. Stated.

“I think they’re grabbing market share because other companies are leaving, but I think in five years they’ll see that they need more development, more exploration, more supply,” Valle said. added.

The move comes as major oil companies scale back efforts to combat climate change and alternative energy. exxon Funds were extracted from efforts to turn algae into biofuel.Blood pressure at the beginning of this year reduced climate ambitions, emissions reductions over this decade will be from 35 percent to 40 percent to 20 percent to 30 percent. Shell in June canceled the plan To reduce oil production.

Meanwhile, Tom Kloza, global head of energy analysis at Oil Price Information Services, said he did not see the acquisition as a vote of confidence in the future of oil fuels.

“I don’t agree with people who think this is a vote of confidence in the continued existence of fossil fuels. I don’t think this is anything like a vote of confidence,” he said, adding that funding for long-term projects such as deep-sea drilling is not a given. He said spending more on fossil fuels would be betting on fossil fuels.

“We’re fed up with what technology is going to bring in terms of electric vehicles and other solutions,” Kloza said.

If anything, Robert Weiner, a professor of international business at George Washington University, said he sees the deal as a consolidation of an industry with little promise of growth.

“Exploring for oil and discovering oil is a bet on the future of fossil fuels,” Weiner said. “Rather, they are simply adding to the oil they already have by buying other people’s oil.

“All of these oil companies have a lot of money sitting in their pockets. Previously they would have invested in new exploration, but the future of the industry is so cloudy and uncertain that they are investing in other people’s work instead. You’re doing something safe like buying oil.”

Meanwhile, the outcome of efforts to reduce fossil fuels in the name of climate change is also uncertain, made even more uncertain by two recent reports that appear to have drawn opposite conclusions.

This week, the International Energy Agency (IEA), a group of major energy consumers that includes the United States, predicted that global demand for coal, oil and gas could peak by the end of the year.

The report attributes this to the “increasing momentum” of non-fossil energy technologies around the world and “changing economic structures.” It said the number of electric vehicles on the roads and the share of renewable energy in the global electricity mix is ​​expected to increase significantly.

Meanwhile, earlier this month, the U.S. Energy Information Administration (EIA) predicted that energy-related emissions will increase through 2050.

The agency said this would happen as population and income growth “offsets” the effects of efficiency and low-carbon intensity. He said there would be some progress in transitioning away from fossil fuels, which cause global warming, but it would not be “enough” to counter growth.

Kairos principal analyst Antoine Halff, who previously worked at both the EIA and IEA, said that even if fossil fuels peak, they will still be “part of the mix for a long time.” .

“The process of making sure the last one survives is underway little by little,” he added. “Large companies with vast expertise, know-how, economies of scale, access to capital, etc., see an opportunity to differentiate themselves.”

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