The latest two deals by US oil rivals are similar to the mega-mergers – in dollars if not headlines – of the turn of the century, which spawned the modern super-major oil corporations.
In August, ExxonMobil agreed to buy Pioneer Natural Resources for $59.5 billion and last week, Chevron announced it would pay $53 billion for Hess Corporation. These deals chart a very different future for the US shale oil industry and for their European rivals.
The acquisitions are the third and fourth-biggest upstream oil and gas deals on record. However, despite the large purchases, they are very different. Pioneer is an onshore tight oil producer in the US and, under chief executive Scott Sheffield, was a pioneer of shale in the Permian Basin of West Texas and New Mexico.
Petroleum company Hess has had only two chief executives in its nearly 100-year history: Founder Leon Hess, who ran it as a 19-year-old in 1933 up to his retirement in 1995, and his son, John. It has important shale holdings, mostly in the Bakken Formation of North Dakota, rather than the Permian.
But its crown jewel is its 30 per cent stake in the Stabroek Block, nearly 200km offshore from Guyana, where it partners with ExxonMobil in one of the world’s most exciting new oil provinces. The small South American nation’s output could reach 900,000 barrels per day by 2028, which would make it the biggest per capita oil producer in the world.
The deals are landmarks for two reasons. First, they are crucial for the future of US shale output. Over the past decade, this has been the most important source of new global oil and gas, limiting price rises and giving the US government the confidence to challenge important petroleum-producing political opponents – Russia, Iran and Venezuela – with increasingly severe sanctions.
From 2011 to 2014, when Brent crude oil averaged $95 per barrel, US oil production expanded by 1 million bpd each year. From 2015 to 2017, prices were much lower and growth was only 200,000 bpd annually, but efficiencies were unlocked. In 2018 and 2019, with the recovery in prices to an average of $67 per barrel, shale oil grew even more, adding 1.5 million bpd each year before Covid struck.
In 2021, with Brent at $71 per barrel, output was flat. Now prices are much higher, at about $90 per barrel, and although consultancy Rystad Energy expects growth next year of 500,000 bpd, total US oil output in September regained its all-time high of about 13 million bpd.
This is partly due to the curse of success. Decline rates – the pace at which production reduces over a period – from shale wells are fast and the productive base is much bigger than when the shale boom started, so drillers now have to run much faster to stay still. It partly reflects depletion of the most productive parts of the main shales and the move to drilling in lower-quality rocks.
But to an increasing extent, it indicates consolidation and a change in mindset by oil companies. The pursuit of growth at all costs by a multitude of small, often private outfits, brought dismal profitability and a series of bankruptcies. Now, investors demand that shale producers focus on returning cash rather than spending.
The leading companies don’t face such a hyper-competitive environment. Occidental outbid Chevron for Anadarko in 2019; Chevron picked up PDC for $6.3 billion in May; and Pioneer itself acquired Parsley, run by Mr Sheffield’s son Bryan, in 2020. Many other private equity-backed corporations have merged or been acquired and European oil companies such as Shell and Equinor sold their shale holdings.
ExxonMobil, which never used to be much of an acquirer and had its fingers burnt with the purchase of shale gas outfit XTO in 2010, paid $6.6 billion for the Permian Basin holdings of the Bass family in 2017, and $4.9 billion for enhanced oil recovery specialist Denbury Resources in July. It will now hold 15 per cent of Permian oil output.
There are still a few more consolidation candidates, but apart from the other big players, Occidental and ConocoPhillips, only EOG is on the same scale as Pioneer and Hess, with Diamondback, Coterra, Devon, APA, Marathon, Chesapeake and gas-focused EQT rather smaller.
Some think dominant super-majors will grow shale faster. They bring technical excellence, efficiencies of scale, the consolidation of multiple fragmented holdings, and the financial firepower to invest long term.
But they are also traditionally conservative operators and face profitability pressures. Their approach will probably recover more oil ultimately, but not in rapid growth spurts when prices rise.
Their long runway of domestic drilling means they will be active internationally only in the most attractive locations, such as Guyana, and in the East Mediterranean, where Chevron built a position by buying compatriot Noble for $13 billion in 2020.
Second, the European super-majors are absent. Neither BP, TotalEnergies, Eni or Equinor have made any significant upstream acquisitions since Shell bought BG for its liquefied natural gas assets in 2015.
Shell, which pulled out of Stabroek before the first well was drilled, would surely have been a contender for Hess historically.
But even though TotalEnergies has continued seeking new oil and gas, and recently appointed Shell chief executive Wael Sawan has signalled a renewed interest in upstream, they are still heavily focused on their net-zero strategies and low-carbon businesses.
Chevron and ExxonMobil will do more carbon capture and perhaps hydrogen and biofuels. But they are not interested in wind, solar, electric vehicle charging networks, and the other energy transition themes the Europeans are trying to crack.
The two companies are betting very firmly on a strong future for oil.
Since the break-up of Standard Oil in 1911, the strategies of the big European and US oil companies have followed each other quite closely. Now, they are charting quite different paths.
The problem for Shell, BP and their peers is that even if they’re right about the pace and direction of the energy transition, they may not be the best placed to make the journey.
Robin M. Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis
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Slow loris biog
From: Lonely Loris is a Sunda slow loris, one of nine species of the animal native to Indonesia, Malaysia, Thailand and Singapore
Status: Critically endangered, and listed as vulnerable on the International Union for Conservation of Nature red list due to growing demand in the global exotic pet trade. It is one of the most popular primate species found at Indonesian pet markets
Likes: Sleeping, which they do for up to 18 hours a day. When they are awake, they like to eat fruit, insects, small birds and reptiles and some types of vegetation
Dislikes: Sunlight. Being a nocturnal animal, the slow loris wakes around sunset and is active throughout the night
Superpowers: His dangerous elbows. The slow loris’s doe eyes may make it look cute, but it is also deadly. The only known venomous primate, it hisses and clasps its paws and can produce a venom from its elbow that can cause anaphylactic shock and even death in humans
House-hunting
Top 10 locations for inquiries from US house hunters, according to Rightmove
- Edinburgh, Scotland
- Westminster, London
- Camden, London
- Glasgow, Scotland
- Islington, London
- Kensington and Chelsea, London
- Highlands, Scotland
- Argyll and Bute, Scotland
- Fife, Scotland
- Tower Hamlets, London
Dubai works towards better air quality by 2021
Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.
The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.
These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.
“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.
“We’re in a good position except for the cases that are out of our hands, such as sandstorms.
“Sandstorms are our main concern because the UAE is just a receiver.
“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”
Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.
There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.
“There are 25 stations in total,” Mr Al Daraji said.
“We added new technology and equipment used for the first time for the detection of heavy metals.
“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”
Why the Tourist Club?
Originally, The Club (which many people chose to call the “British Club”) was the only place where one could use the beach with changing rooms and a shower, and get refreshments.
In the early 1970s, the Government of Abu Dhabi wanted to give more people a place to get together on the beach, with some facilities for children. The place chosen was where the annual boat race was held, which Sheikh Zayed always attended and which brought crowds of locals and expatriates to the stretch of beach to the left of Le Méridien and the Marina.
It started with a round two-storey building, erected in about two weeks by Orient Contracting for Sheikh Zayed to use at one these races. Soon many facilities were planned and built, and members were invited to join.
Why it was called “Nadi Al Siyahi” is beyond me. But it is likely that one wanted to convey the idea that this was open to all comers. Because there was no danger of encountering alcohol on the premises, unlike at The Club, it was a place in particular for the many Arab expatriate civil servants to join. Initially the fees were very low and membership was offered free to many people, too.
Eventually there was a skating rink, bowling and many other amusements.
Frauke Heard-Bey is a historian and has lived in Abu Dhabi since 1968.
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UAE currency: the story behind the money in your pockets
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Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
How much do leading UAE’s UK curriculum schools charge for Year 6?
- Nord Anglia International School (Dubai) – Dh85,032
- Kings School Al Barsha (Dubai) – Dh71,905
- Brighton College Abu Dhabi - Dh68,560
- Jumeirah English Speaking School (Dubai) – Dh59,728
- Gems Wellington International School – Dubai Branch – Dh58,488
- The British School Al Khubairat (Abu Dhabi) - Dh54,170
- Dubai English Speaking School – Dh51,269
*Annual tuition fees covering the 2024/2025 academic year
SPECS
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Specs – Taycan 4S
Engine: Electric
Transmission: 2-speed auto
Power: 571bhp
Torque: 650Nm
Price: Dh431,800
Specs – Panamera
Engine: 3-litre V6 with 100kW electric motor
Transmission: 2-speed auto
Power: 455bhp
Torque: 700Nm
Price: from Dh431,800
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The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
Retail gloom
Online grocer Ocado revealed retail sales fell 5.7 per cen in its first quarter as customers switched back to pre-pandemic shopping patterns.
It was a tough comparison from a year earlier, when the UK was in lockdown, but on a two-year basis its retail division, a joint venture with Marks&Spencer, rose 31.7 per cent over the quarter.
The group added that a 15 per cent drop in customer basket size offset an 11.6. per cent rise in the number of customer transactions.
'The worst thing you can eat'
Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
Snacks - Potato, corn and tortilla chips often contain trans fat. And while popcorn can be a healthy snack, many types of packaged or microwave popcorn use trans fat to help cook or flavour the popcorn.
Fried food - Foods that require deep frying — french fries, doughnuts and fried chicken — can contain trans fat from the oil used in the cooking process.
Refrigerator dough - Products such as canned biscuits and cinnamon rolls often contain trans fat, as do frozen pizza crusts.
Creamer and margarine - Nondairy coffee creamer and stick margarines also may contain partially hydrogenated vegetable oils.
