Equinor Trims Americas Presence in Strategic Shift

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Equinor will slim down its portfolio of operated assets in the Americas by exiting Mexico and Nicaragua and stepping down from the operators’ seat in shale plays in Argentina and the US. The Norwegian company said earlier this week it will downsize its international presence to 15 countries, with plans to operate assets in only seven. Equinor was active in 30 countries as recently as 2017 (IOD Jun.15'21). The firm's strategic shift is particularly pronounced in exploration, where it has reduced its footprint by two-thirds in the last four years. “Some of these asset exits are smaller than others, but together, they represent a big change,” Equinor Executive Vice President of International Exploration and Production Al Cook told investors. “We're moving from the frontier to the familiar.” Equinor pushed into Latin America in the mid-2010s seeking growth opportunities after disappointing forays into US shale and operated exploration in the Gulf of Mexico. The company’s strategic retreat echoes a larger trend in the global oil and gas industry, which has become more selective about exploration amid expectations of shrinking oil demand in the 2030s. Mexico Exit Equinor is the highest-profile international company to publicly exit Mexico after capturing a pair of frontier blocks in the offshore Salina Basin with UK major BP and France's TotalEnergies during the country’s first deepwater bid round in 2016 (OD Dec.6'16). Equinor confirmed to Energy Intelligence that it plans to return its operated Block 3 to regulators. The company had permitted an initial prospect there, Zip-1EXP, but drilling has not moved forward (OD Aug.18'20). The other tract, Block 1, is operated by BP, which did not comment. Asked if the UK major had preferential rights on the block or if a sales process would be conducted, Equinor said it was "still looking for the best option forward.” Total is also a partner in the block. Under Mexico exploration contracts, companies are generally able to skip committed wells and return tracts if they pay a fine. Exxon Mobil and Total also returned a block from the country's initial deepwater round after the Etzil well failed to make a commercial discovery. Equinor captured four licenses off the Pacific coast of Nicaragua in 2015, a very frontier play, but did not drill any wells. Argentina Shuffle Equinor said it will step back from an operated role in Argentina shale, including the Aguila Mora Noreste and Baja del Toro Este Blocks, part of its strategy to focus solely on operating deepwater projects. The company has a 90% interest in the blocks, with provincial oil company Gas y Petroleo de Neuquen holding the remaining 10%. Equinor has a right to relinquish the permits to its partner, and doesn’t anticipate a sales process, a spokesman said. The Norwegian firm entered Argentina in 2017 and was still adding to its position as recently as last year (OD Feb.3'20). Equinor said it does plan to continue to “high-grade” its position in the prolific Vaca Muerta Shale and continue collaborating with state oil company YPF. Equinor has a 50% share in the Baja del Toro licence, with operator YPF holding the remaining 50%. At Bandurria Sur, Equinor and Royal Dutch Shell each hold 30%, while YPF operates with a 40% stake. Equinor also holds a stake in eight frontier offshore exploration blocks off Argentina, of which it operates five (OD May20'19). The company told Energy Intelligence it plans to keep those stakes. Equinor will also remain in Brazil, where it recently sanctioned the massive Bacalhau project (OD Jun.1'21), as well as developments in the US Gulf of Mexico and the recently reinvigorated Bay du Nord project offshore Newfoundland (related). Kathrine Schmidt, Houston

Topics:
Exploration, Offshore Oil and Gas, Shale, Corporate Strategy
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