With the price of oil nowhere near $100 a barrel, major oil companies like Exxon Mobil Corp. (NYSE:XOMC), BP plc (NYSE:BPC), Royal Dutch Shell plc (NYSE: RDS-A, RDS-B) and Chevron Corp. (NYSE:CVXC) are making smaller investments in projects that turn around much quicker.
They are also putting money into existing oil fields using new techniques to claim oil that wasn’t accessible using older methods.
For Exxon, plans include drilling in Texas, New Mexico and North Dakota in an attempt to extract up to 750,000 barrels a day. This plus other shale production would amount to 1/3 of Exxon’s current output the company said.
The idea, according to ConocoPhillips (NYSE:COPC) CEO Ryan Lance, is to make money faster and avoid those historical decades long multibillion dollar investments that made sense when oil was more expensive.
Cost Cutting Moves
In addition to less expensive and shorter term projects, companies like BP have pledged to lower costs to drive the break-even price on oil down to between $35 and $40 per barrel. Cash discipline will be key to pulling off this kind of savings.
Other moves by BP include investing $2 billion in a 10% stake in fields in the UAE, home of some of the world’s lowest oil-extraction costs. Mainly it’s all about finding and extracting low cost oil and gas.
The Pollution Problem
Meanwhile a recent study found that 8 of the world’s largest oil companies are responsible for as much pollution as the entire U.S. This puts unwanted focus on companies like Exxon BP and Royal Dutch Shell, along with others at a time when cost containment is critical.
The study suggests policymakers would be better off focusing on these companies instead of trying to develop national environmental policies. At the same time President Donald Trump has announced plans to slash environmental regulations and possibly withdraw from the landmark Paris Agreement.
As if all this wasn’t enough, Homeland Security numbers suggest that oil and gas companies in Texas, especially those around Houston, have exposure to major cybersecurity threats. This is due to the size of their operations and growing digitalization of the energy industry.
The Houston Chronical cited 350 cybersecurity incidents at companies operating in the area for the period between 2011 and 2015. Homeland Security found 900 security flaws in U.S. oil and gas companies in the same period, making the energy industry the worst performer in cybersecurity.
2017 And Beyond
Everything points to a slow path to recovery for the oil and gas industry in 2017. According to John England, US Energy & Resources leader and US and Americas Oil & Gas leader, Deloitte LLP said, “I would characterize 2017 as the ‘slow road back’ (for gas and oil).
Nonetheless, England said, the industry is incredibly resilient and employs “some the brightest, most innovative people I have ever met.” Overall, England said he was mostly optimistic about the industry for 2017 and beyond.