2022 will remain in the annals for the record profits of the big oil companies due to the insatiable demand for oil and gas combined with the war in Ukraine, and everything points to this trend continuing in 2023.
(Read: Oil companies would change Colombia for Ecuador due to investment challenges).
Four of the five largest oil companies (Shell, Chevron, ExxonMobil and TotalEnergies) broke their record net profit in 2022, while BP broke a record leaving out one-off items. Total, in 2022 they added 151,000 million dollars of benefits.
Adjusted profits, which allow a better view of profitability atExcluding accounting losses caused by withdrawals from Russia, they are around 200 billion. The companies took full advantage of the price escalation, with a barrel of Brent -a reference for black gold- close to 140 dollars in March 2022, and with gas at 350 euros per megawatt hour last summer in Europe, 15 times more than the usual price.
Since then, prices have gone down but in 2023 “we may have other peaks, as the war in Ukraine is far from over“, warned Adi Imsirovic, a researcher at the Oxford Institute for Energy Studies.
Despite uncertainties in the world economy, the Organization of the Petroleum Exporting Countries (OPEC) does not expect demand to drop and, on the contrary, predicts growth for 2023 (+2.2 million barrels per day (mbd) in 2023, after the increase of +2.5 mbd in 2022).
(Read: Oil rose due to the earthquake in Turkey and sanctions on Russia).
The profits amassed by the big groups pose a dilemma for the political class in the West, where life has become more expensive in recent months. In the Old Continent and in the United States, turning on the boiler, making bread or driving with diesel constitutes a significant expense for many homes and businesses.
“I do my part to lower prices, the time has come for Big Oil to do its partBiden said last week, alluding to big oil companies.
On Tuesday, he called the profits of those companies “outrageous.” In France, the announcement of TotalEnergies’ profits (20.5 billion dollars) fueled the debate on whether these “super profits” should be taxed more.
In the United Kingdom, the government approved in May 2022 a tax on exceptional energy benefits, something that the European Union also did in September, with a “temporary contribution of solidarity” that Exxon denounced in court. “What we need right now is more supply.
Instead, what has been put in place is a penalty on the energy sector as a whole,” said Darren Woods, Exxon Chairman.
(See: Oil production in Colombia increased 5.24% in December).
The oil majors already benefited in 2021 from the rebound in demand after the covid-19 pandemic, a trend that intensified in 2022, with prices soaring due to the conflict in Ukraine, Western sanctions against Moscow and the decline in Russian exports.
In addition, these multinationals also benefited from having opted for “assets with strong added value” such as liquefied natural gas (LNG) projects, said Moez Ajmi, from the EY cabinet.
And now? “In my opinion, prices will increase because of the oil embargo imposed by the West on Russia […]so those companies could be just as profitable in 2023 as they were in 2022“, Ajmi added. According to him, the demand will continue to be high for “the renunciation of the zero covid policy in China.”
A demand for oil and gas is also driven by tens of billions of dollars in consumer subsidies, measures that “prolong the crisis,” according to Adi Imsirovic. By wanting to “subsidize fossil fuels […] demand continues to grow instead of falling,” he said, adding that EU governments should be content to help “the poorest” in the first place.
(Read: How much could a gallon of gasoline rise in Colombia in 2023?).
Private investment in exploration will fall 33%, half of this fall will be given by the entry into force of the tax reform. For this year, private companies will invest US$370 million less than last year, reported the ACP.
However, taking into account that one of the main players in the industry at the local level is Ecopetrol, therefore the fall that is reflected more strongly in private companies will be qualified. In this way, at a general level, the investment balance for exploration is 4% lower than in 2022, with a total of US$1,240 million in this activity.
AFP
