Global Insight

Supermajors Optimizing for Energy Transition

ANALYSTS & CONTRIBUTORS

Elena Every

Associate

Jared Kugler

M.Sc., P.Geo. Senior Associate

Matthew Keillor
Editor

FOCUS

What Enverus Global Intelligence Research and Global Scout reports from 3Q21 are relevant to supermajors’ upstream portfolios and the energy transition?

KEY POINTS

  • Based on supermajors’ stated goals regarding the energy transition and current output, ~1.6 MMbbl/d of liquids production is set to drop from their portfolios by 2030.

  • Countries like Angola, Venezuela, Iraq and Nigeria screen as high risk due to political instability and high GHG intensity of operations, in part due to routine gas flaring, while Southeast Asia and growth regions like Brazil and Guyana rank as much more favorable.

  • Argentina’s Vaca Muerta Shale, where supermajors increased their land positions since 2019 to over 1 million net acres, is unlikely to be a near-term divestment target. Most major operators in the play are planning developments for 2021-2022 after activity fell off last year.

  • Increased activity in the Vaca Muerta is a result of decreased costs leading to highly competitive economics, with many companies active in the oil window seeing single-well, half-cycle breakevens below $40/bbl.

GENERAL

As the supermajors position themselves for the energy transition, they are casting a more critical eye on their portfolios and starting strategic realignments towards cleaner, lower-risk assets. Just in the last year, AB closed the sale of its Alaskan business, ABC exited most of its non-operated U.K. upstream portfolio and ABCD sold Delaware Basin and onshore Egypt assets, to name only a few recent deals.

Our recent report analyzed the transition strategies of AB, BCE, ABC, and DEF, the six highest producing supermajors that together account for ~10% of the global liquids supply stack. Based on stated goals and present output, ~1.6 MMbbl/d of liquids production is set to drop from supermajor portfolios by 2030. Based on M&A trends from the past five years, we believe small and mid-sized independents and national oil companies (NOCs) are the most likely players to pick up these assets.

Enverus’ Global Scout Network also assessed the risk profile of the countries that supermajors operate in by ranking GHG intensity, asset life-cycle, fiscal regimes and political risk. Countries like Angola, Venezuela, Iraq and Nigeria screen as high risk due to political instability and high GHG intensity of operations, in part due to routine gas flaring. Gas producers like Southeast Asia and growth regions like Brazil and Guyana score much more favorably. The recent Global Scout articles below hold more details on countries seeing divestment due to higher political instability.

WHAT TO LOOK FOR:
 

"Supermajor strategy appears to be regional: U.S. companies prioritize carbon offsets, but European peers want to reduce outright liquids production."
 

Supermajors and GHG Targets, Sept. 16, 2021
  • NIGERIA | Farm-In Opportunities | RDSA progressing talks with government for exit from onshore Nigeria
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  • IRAQ | Company Activity | Lukoil and BP considering exits from major oil projects
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WHAT TO LOOK FOR:
 

"Similar to the early days of the North American shale industry, Y/Y oil recoveries continue to increase because of more intensive completions. Higher proppant intensities, fluid intensities and tighter stage spacing raised normalized EURs by 10%-20% annually since 2017."
 

-Vaca Muerta | Are Bigger Completions Helping Recoveries?

Argentina’s Vaca Muerta shale play is unlikely to be a divestment target for the supermajors in the near future. ABCD, ABC, and SJR have increased their positions since 2019 without exiting any acreage, and together with ABCD, ABC, and SJR, they hold more than 1 million net acres. Acreage multiples have been consistent since 2015 at around $10,000/acre, quite different from the rise and fall observed in the Lower 48.


We believe increased activity shown in our recent Vaca Muerta map is a result of decreased costs leading to highly competitive economics, with many companies active in the oil window seeing single-well, half-cycle breakevens below $40/bbl. While Vaca Muerta single-well productivity has always been superior compared to its U.S. counterparts, heightened completions intensities have driven lateral-normalized EURs even higher, making them now equivalent to 3x Midland and Eagle Ford and 1.7x Delaware present-day recoveries. The following Global Scout Network articles provide additional details on activity levels within the Neuquen Basin.

  • ARGENTINA | County Production and Reserves | Vaca Muerta sets crude production record in June in Neuquen with highest volumes in 16 years
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  • ARGENTINA | Asset Transactions | Vista acquires COP’s interests in Bandurria Norte and Aguada Federal
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WHAT WE'RE WATCHING

IOCs continue exploration activities in the Guyana-Suriname Basin. However, outside the “golden lane” from XOM’s Stabroek Block through TTE’s Block 58, probes have been largely unsuccessful. Further details on current exploration activity outside this fairway can be read in this report and in these articles from the Enverus Global Scout Network:

  • SURINAME | Ongoing Exploration Wells | TTE spuds Bonboni 1 on Block 58
    TTE and partner APA spudded the Bonboni 1 new-field wildcat (NFW) on Block 58 off Suriname in late August. The Maersk Valiant drillship is drilling the well, which is situated in the northeast portion of the block, downdip and some 45 kilometers north of the four discoveries made on the tract: Maka Central, Kwaskwasi, Sapakara West and Keskesi East.
  • GUYANA | Ongoing Exploration Wells | Eco confirms late August 2021 spud for Sapote 1 on Canje
    XOM spudded the Sapote 1 exploration well on the Canje Block off Guyana in late August. The well is the third wildcat on the tract, though both previous probes were unsuccessful. Sapote 1 is downdip and 50 kilometers north of the 2019 Haimara-1 discovery on XOM’s adjacent Stabroek Block.

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