MOSCOW (MRC) -- The massive plunge in oil prices amid the price war between OPEC and Russia and a drastic decline in oil demand due to the global coronavirus pandemic has forced the world's top integrated oil and gas majors to take swift and dramatic measures to preserve cash and protect their balance sheets, reported S&P Global.
As of April 7, 12 of the world's largest public oil and gas companies by market value have announced specific cuts to their 2020 capital spending programs, totaling approximately USD43.6 billion, as global crude prices have tumbled below USD30 per barrel.
In total the announced cuts by the 12 integrated majors represent an approximate 23% decline in capital spending compared to their initial plans and far eclipse announced 2020 capex reductions by independent oil and gas producers.
Thus, Exxon Mobil Corp. announced April 7 that it will cut its capital budget for 2020 by 30%, or USD10 billion, in response to low energy prices caused by collapsing demand. Exxon said it would also cut its cash operating expenses by 15%.
Exxon's new capital investment budget for the year is now about USD23 billion, a decrease from the USD33 billion previously announced, with most of the spending cuts to take place in the US Permian Basin.
BP PLC announced April 1 that it will cut its 2020 capital spending budget by $4 billion, or about 25% of previous guidance, to USD12 billion to navigate the depressed economic and oil price environment amid the coronavirus pandemic. BP, which spent USD15.2 billion in 2019, also said it will write down about USD1 billion in noncash, nonoperating charges in the first quarter.
Brazilian state-run oil company Petroleo Brasileiro SA, also known as Petrobras, said March 26 it will cut 2020 investments by USD3.5 billion to a total of USD8.5 billion, from USD12 billion previously, to soften the blow of the new coronavirus pandemic and the recent oil price downturn on the business. The major has also proposed cutting its operating expenses by the year by USD2 billion and postponing paying out dividends to shareholders.
Italy's Eni SpA said March 25 it plans to cut capital expenditures for 2020 by about EUR2 billion, or 25%, from its previously planned spend of approximately EUR8 billion, to adjust for market conditions caused by the coronavirus outbreak and plunging oil prices.
Eni on March 18 announced it would withdraw its €400 million share buyback proposal. Eni will reconsider relaunching the buyback when the Brent price is equal to at least USD60/bbl, it said.
Spain's Repsol SA said March 25 it will reduce 2020 capital expenditures by more than EUR1 billion, or 26%, due to the oil price crash and the coronavirus pandemic. The company is also looking to decrease operating expenditures by more than EUR350 million.
Embattled oil producer Occidental Petroleum Corp. on March 25 slashed its spending plans for the second time in a month as it tries to navigate a low oil price environment and heat from activist investor Carl Icahn.
The new spending guidance, between USD2.7 billion and USD2.9 billion, is down from the USD3.5 billion to USD3.7 billion range given March 10 and represents a 47% decrease from the midpoint of the company's initial 2020 spending plan of USD5.2 billion to USD5.4 billion.
In addition to trimming its capital spending plan, Occidental said it will cut 2020 operating and corporate costs by at least USD600 million, which includes "significant" salary cuts for the corporation's executive team.
The company also announced March 10 it will cut its dividend - a major selling point for investors from 79 cents per share to 11 cents per share.
Norway's Equinor ASA said March 25 it will slash capital expenditures as well as exploration and operating costs by a total of USD3 billion amid the one-two punch of the coronavirus pandemic and plummeting oil prices.
The major will cut organic capex by USD2 billion to USD8.5 billion, down about 19% from a prior range of USD10 billion to USD11 billion. In addition, it will reduce exploration expenses from USD1.4 billion to USD1 billion and will trim operating costs by about USD700 million from original estimates.
On March 22, Equinor announced it would suspend its USD5 billion share buyback program due to the current oil price crisis.
California-based Chevron Corp. said March 24 it would cut capital expenditures for 2020 by USD4 billion, or about 20%, to USD16 billion and aims to reduce cash capital and exploratory expenditures by USD3.3 billion, to USD10.5 billion. The US supermajor also said it will halt its USD5 billion share buyback program and will slice run-rate operating costs by more than USD1 billion by the end of the year.
Key to Chevron's new capex plan is trimming costs for its expansion in the US Permian Basin. The company has reduced its Permian production guidance by 125,000 barrels of oil equivalent per day, or 20%, since it plans to reduce spending in the region by 50% this year from USD4 billion to USD2 billion.
Canada's Suncor Energy Inc. announced March 23 it would lower its 2020 capital program to between CD3.9 billion and CD4.5 billion, a decrease of CD1.5 billion, or 26%, from the midpoint of the original guidance range of CD5.4 billion to CD6.0 billion.
Suncor also slashed its total operating expenditures by more than CD1 billion, from CD11.2 billion of expenditures in 2019. Suncor decided to extend for up to two years the timelines for the cogeneration facility at the company's oil sands base plant, Forty Mile wind power project and some offshore developments.
In light of the oil price crash, Royal Dutch Shell PLC said March 23 it will slash this year's capex to USD20 billion if not lower, from an initial level of around USD25 billion. The Anglo-Dutch major will also cut underlying operating costs by USD3 billion to USD4 billion per year over the next 12 months, and will suspend the next USD1 billion tranche of its massive USD25 billion share buyback program.
France's Total SA said March 23 it will trim organic capital expenditures this year by more than USD3 billion and will suspend its USD2 billion buyback program. The revised capex will reduce net investments for this year to less than USD15 billion, with savings mostly in the form of short-cycle flexible capex.
Saudi Arabian Oil Co. said March 15 that its capital expenditures for the current year will run anywhere from USD25 billion to USD30 billion, down from USD32.8 billion in 2019. The midpoint of the company's new range is down by an average of
We remind that as MRC wrote previously, in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.
Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
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