Wael Sawan took over as CEO in January, tasked with implementing Shell’s transformation from an oil major into an integrated energy company. The company recently underwent an internal restructuring, merging its low-carbon operations with the downstream business to become a one-stop energy company, reflecting its customer-based approach. At the same time, high-grading across the fossil fuel value chain remains a priority. Shell’s upstream focus is on deepwater after the sale of its Permian assets. Brazil and the USGOM remain key growth regions, while exploration in frontier basins will advance in the near term.

Chevron announced a 2022 profit of $35.5, and appears to be staying the course of its returns-focused capital discipline strategy, which has served it well since before the pandemic. Core objectives include growing dividends, retaining a strong balance sheet and returning surplus cash to investors. To do so, Chevron will retain an integrated business model, growing both traditional energy and low-carbon businesses. Capital spending in 2023 is set for $14 billion, up more than 25% from 2022, with the bulk set aside for upstream growth. Chevron is also stepping up low-carbon investment, with the acquisition of renewable fuels player REG for $3.15 billion in 2022 a key move.

Drilling activity in 2023 looks set to continue at similar levels observed in 2022, as companies are buoyed by increased oil and gas prices but still operating under strict capex budgets. The Eastern Mediterranean continues to produce high-quality discoveries with Chevron, Eni and Wintershall Dea all recording positive results from drilling in the last few months, and other key players planning upcoming campaigns. We also see several high-impact wells having the potential to open plays and greatly expand regional resources this quarter, with a focus on Namibia, USGOM, Gabon and offshore Canada.

Oman is advancing energy sector reforms to prepare for the transition and boost state finances. The establishment of an integrated, state gas firm is Muscat’s latest move in reorganizing its energy sector. Like Energy Development Oman, the new firm’s structure is intended to offset energy expenditures from the state budget. However, it joins a long roster of state companies with often overlapping mandates, potentially generating confusion for investors. While high energy prices improved Oman’s outlook, reforms also target diversification into renewables and green hydrogen. Yet, until these sectors develop, Oman remains exposed to price shocks, leaving its progress vulnerable to reversal.

Upstream M&A dipped in the fourth quarter to reach only $95 billion in deal flow for the year — far below the 2021 post-pandemic rebound — tested by geopolitical turmoil and energy market volatility. Energy Intelligence expects the competing calls for energy security and the energy transition to continue to weigh on company strategies this year. Despite stronger balance sheets going into 2023, capital discipline will prevail, impacting the appetite and scope for upstream M&A. We see companies targeting a mix of fossil fuel and low-carbon energies in their incremental spending plans.

The pressure to monetize hydrocarbon resources is on, with a number of governments finally advancing licensing rounds as 2022 comes to a close. In Latin America, Guyana formally launched an offshore round in December, under revised terms and conditions, while Suriname is offering deepwater acreage in the Demerara area. Brazil’s open round system recently drew strong industry interest in pre-salt offerings. The outlook for 2023 bid rounds is also positive, with existing producers Algeria, Nigeria and Indonesia announcing new resource opportunities. Yet, we continue to monitor climate-related transition pressures, such as Norway’s moratorium on new frontier exploration rounds.

Petrobras is set for a strategy shake-up with the return of Luiz Inacio Lula da Silva. The NOC is likely to shift back to an integrated company model, having spent the past several years almost solely focused on the E&P segment and rationalizing parts of the downstream and upstream portfolio to reduce debt and improve corporate governance. Upstream growth remains on track, with Petrobras expected to grow production to 3.1 million b/d by 2027—largely from its massive cost efficient, low carbon pre-salt assets. The downstream segment will see a re-think, however, as refinery sales are paused. Petrobras will also likely ramp up low-carbon spending, expanding its current decarbonization efforts to grow in new areas (like hydrogen and wind) to align with the new government’s agenda.

Drilling activity in 2022 has continued apace, with 17 high-impact discoveries recorded in October-November 2022, in comparison to 13 during the same period in 2021. Higher oil and gas prices have encouraged select companies to proceed with advantaged exploration targets. We expect continued but selective exploration capital allocation in 2023, targeting both new and traditional plays in upcoming drilling plans.

Competitive Intelligence Research is pleased to share the Executive Summary findings from this year's Top 100: Global NOC & IOC Rankings. “More supply” has been a key rallying cry as the energy crisis deepens. However, the latest Energy Intelligence Top 100 report show a post-pandemic oil and gas industry still wrestling with strategic direction. Saudi Aramco, NIOC, CNPC and Exxon Mobil retain the first, second, third and fourth spots, respectively. Consolidation centered in, but not limited to, North America, and price-related reserve growth have opened space in the Top 100 for both new and returning companies in this latest ranking. Still, the Russia-Ukraine war has only amplified post-pandemic recovery imbalances and underinvestment across all fuels. It has also further illuminated the difficulty in finding quick solutions compatible with longer-term transition strategies.