Print

Corporate Consolidation in The U.S. Oil and Gas Sector: Implications for the Global Oil Market

63
Rubric: Economy, Economic Theory
DOI: 10.20542/0131-2227-2024-68-6-18-28
EDN: JBKXJW
I. Kopytin, kopytin@imemo.ru
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation.
PDF (RUS)

Received 15.03.2024. Revised 27.03.2024. Accepted 01.04.2024.

Abstract. The U. S. oil and gas sector is experiencing a new wave of mergers and acquisitions. The world’s largest private vertically integrated oil and gas companies are adding the best assets from the tight oil and deepwater shelf sectors to their production portfolios. At the same time, the consolidation of so-called independent producers is taking place. The consolidation of U.S. oil companies will have a significant impact on the global oil market through several channels. First, the concentration of tight oil production in the hands of a small number of large companies will make it more resistant to price shocks, both to a decrease and an increase in oil prices. Second, the anticipated increase in oil prices will open up opportunities for OPEC countries in the second half of the current decade to increase oil production while simultaneously receiving sufficient revenue from its export to support the required budget expenditures. Third, the redistribution of the domestic oil market in the United States in favor of American oil companies will continue, as oil imports are reduced in favor of domestic production. Fourth, the concentration of American oil production in the hands of a limited number of companies will lead to an even greater increase in the export of crude oil and petroleum products from the United States. Fifth, the consolidation will push faster growth in oil production in the Western Hemisphere – the USA, Canada, Guyana and Brazil. Sixth, the consolidation of American oil companies will encourage scaling up of business by national state oil companies in OPEC countries.

Keywords: merges and acquisitions, vertically integrated oil and gas company, supermajors, tight oil, costs, risks of oil demand, world oil market


REFERENCES

1. Evans B., Nyquist S., Yanosek K. Mergers in the Oil Patch: Lessons from Past Downturns. McKinsey & Company, July 2016. 5 ð. Available at: https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Mergers%20in%20the%20oil%20patch%20Lessons%20from%20past%20downturns/Mergers-in-the-oil-patch-Lessons-from-past-downturns.pdf (accessed 20.03.2024).

2. Ferris N. Exclusive: Sky-high Oil and Gas M&A Divides Energy Transition Analysts. Energy Monitor, 24.01.2024. Available at: https://www.energymonitor.ai/finance/corporate-strategy/exclusive-sky-high-oil-and-gas-ma-divides-energy-transition-analysts/ (accessed 20.02.2024).

3. Zhukov S., Kopytin I., Maslennikov A., Reznikova O., Sinitsyn M. Transformation of World Oil Market: Drivers and Prospects. World Economy and International Relations, 2023, vol. 67, no. 10, pp. 5-18. (In Russ.) Available at: https://doi.org/10.20542/0131-2227-2023-67-10-5-18

4. Kopytin I. World Oil Market: The Pandemics Will Bring Global Peak Oil Demand Closer. World Economy and International Relations, 2020, vol. 64, no. 9, pp. 26-36. (In Russ.) Available at: https://doi.org/10.20542/0131-2227-2020-64-9-26-36

5. Zolina S.A., Kopytin I.A., Reznikova O.B. “Shale Revolution” in the United States as the Main Driver of the World Oil Market Transformation. Outlines of Global Transformations: Politics, Economics, Law, 2019, vol. 12, no. 6, pp. 71-93. (In Russ.) Available at: https://doi.org/10.23932/2542-0240-2019-12-6-4 

6. Zhukov S., Kopytin I., Reznikova O. Saudi Arabia in the World Oil Market. World Economy and International Relations, 2021, vol. 65, no. 9, pp. 98-107. (In Russ.) Available at: https://doi.org/10.20542/0131-2227-2021-65-9-98-107 

7. Bidiwala I. at al. Shale 2.0. OliverWyman, 2016. 4 p. Available at: https://www.oliverwyman.com/our-expertise/insights/2016/mar/energy-journal-vol-2/operations/shale-2-0.html (accessed 20.03.2024).

8. Keillor M. Exxon Buying Pioneer in Largest U. S. Upstream Deal in 25 Years. Enverus, 12.10.2023. Available at: https://www.enverus.com/blog/exxon-buying-pioneer-in-largest-u-s-upstream-deal-in-25-years/ (accessed 20.10.2023).

9. Exarheas A. Hess Buy Accelerates Trend of Consolidation and Big Money Deals. Rigzone, 25.10.2023. Available at: https://www.rigzone.com/news/hess_buy_accelerates_trend_of_consolidation_and_big_money_deals-25-oct-2023-174467-article/ (accessed 26.10.2023).

10. Blas J. Oil Megadeals Are Back. The Premiums Are Not. Bloomberg, 23.10.2023. Available at: https://www.bloomberg.com/opinion/articles/2023-10-23/chevron-buys-hess-for-53-billion-as-oil-mega-deals-are-back?re_source=postr_story_1 (accessed 20.11.2023).

11. Luhavalja A. ‘How not to do M&A’: A Look Back at Exxon’s Deal for XTO 10 Years Later. S&P Global, 16.12.2019. Available at: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/how-not-to-do-m-a-a-look-back-at-exxon-s-deal-for-xto-10-years-later-55076990 (accessed 20.01.2024).

12. Foelber D. ExxonMobil’s Magic Wand. ESG Review, 25.10.2023. Available at: https://esgreview.net/2023/10/25/exxonmobils-magic-wand/ (accessed 26.10.2023).

13. Crowley K., Wethe D. Exxon to Buy Pioneer for $60 Billion to Dominate Shale Oil. Bloomberg, 11.10.2023. Available at: https://www.bloomberg.com/news/articles/2023-10-11/exxon-to-buy-pioneer-for-60-billion-to-dominate-shale-industry (accessed 24.10.2023).

14. Coleman N. et al. ExxonMobil Buys Shale Giant Pioneer Natural Resources in Major Resource Boost. S&P Global, 11.10.2023. Available at: https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/101123-exxonmobil-buys-shale-giant-pioneer-natural-resources-in-major-resource-boost (accessed 20.10.2023).

15. Spencer S. Industry Appears Ripe for a New Consolidation Round in Next Few Years: Pioneer CEO. S&P Global, 07.12.2021. Available at: https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/120721-industry-appears-ripe-for-a-new-consolidation-round-in-next-few-years-pioneer-ceo (accessed 20.03.2024).

16. Alloway T., Weisenthal J., Rene R. This is what’s Driving the Big Surge in US Oil Production. Bloomberg, 19.01.2024. Available at: https://www.bloomberg.com/news/articles/2024-01-19/this-is-what-s-driving-the-big-surge-in-us-oil-production (accessed 20.01.2024).

17. McCormick M. Permian Basin Deal Wave Heralds New Phase in Shale Oil Revolution. Financial Times, 14.02.2024. Available at: https://www.ft.com/content/6ab6cdba-7f56-4803-a4f7-d30fc5b322cc (accessed 15.02.2024).

18. Somasekhar A. Exxon-Pioneer Tie Up Could Squeeze US Shale Oil Suppliers, Pipelines. Reuters, 09.10.2023. Available at: https://www.reuters.com/markets/commodities/exxon-pioneer-tie-up-could-squeeze-us-shale-oil-suppliers-pipelines-2023-10-09/ (accessed 20.10.2023).

19. Dittrick P. WoodMac: Deepwater, Tight Oil Share Similar Growth Themes. Oil & Gas Journal, 24.06.2019. Available at: https://www.ogj.com/drilling-production/article/14035272/woodmac-deepwater-tight-oil-share-similar-growth-themes (accessed 20.03.2024).

20. Smyth J., Johnston I. ‘Jewel in the Crown’: Chevron Follows Exxon to Guyana’s Oil Riches. Financial Times, 29.10.2023. Available at: https://www.ft.com/content/46af09ca-90e2-4d96-b35d-4434ebd93750 (accessed 20.11.2023).

21. Jacobs J. ExxonMobil Accuses Russia of ‘Expropriation’ as It Exits Oil Project. Financial Times, 17.10.2022. Available at: https://www.ft.com/content/3f46cfb0-68d2-4d29-b98e-1d7628d4638a (accessed 20.11.2020).

22. Jensen M.C. Gulf: Its Troubles Get Deeper. The New York Times, 04.01.1976, Section F, p. 1. Available at: https://www.nytimes.com/1976/01/04/archives/gulf-its-troubles-get-deeper-a-year-of-problems-in-us-and-abroad.html (accessed 20.12.2023).

23. McCormick M., Smyth J. Chevron Loses Shine with Investors after Bumpy Year. Financial Times, 02.02.2024. Available at: https://www.ft.com/content/845ffe89-fe71-477d-bcd2-0a45fdb15358 (accessed 05.02.2024).

24. Zhukov S. Introduction. Seyfulmulyukov I.A. Tight Oil Revolution in the U.S. and Its Implications for the Global Oil Market. Moscow, IMEMO, 2014, ðð. 5-7. (In Russ.)

25. Blas J. The $10 Billion Mistake That Will Revive Canadian Oil. Bloomberg, 12.02.2024. Available at: https://www.bloomberg.com/opinion/articles/2024-02-12/the-10-billion-tmx-pipeline-that-will-revive-canadian-oil (accessed 20.02.2024).

26. Crowley K., Graf R. Exxon Plays Hardball with Chevron over Guyana’s Oil Riches. Bloomberg, 29.02.2024. Available at: https://www.bloomberg.com/news/articles/2024-02-29/exxon-xom-plays-hardball-with-chevron-cvx-to-hoard-guyana-s-oil-riches (accessed 01.03.2024).

27. Eaton C. Chevron’s $53 Billion Deal for Hess in Jeopardy on Possible Exxon Challenge. The Wall Street Journal, 26.02.2024. Available at: https://www.wsj.com/business/energy-oil/exxon-throws-a-wrench-in-chevrons-deal-for-hess-42fa6483?st=z8xusr3i07hr34r&mod=googlenewsfeed (accessed 27.02.2024).

28. McCormick M. Chevron Warns of Threat to $53bn Hess Deal from ExxonMobil. Financial Times, 27.02.2024. Available at: https://www.ft.com/content/3ad64602-88cc-4d4c-ad5e-20993b929bc3 (accessed 27.02.2024).


SOURCES

1. Statistical Review of World Energy 2023. Energy Institute. Available at: https://www.energyinst.org/statistical-review/resources-and-data-downloads (accessed 21.03.2024).

2. Short-term Energy Outlook. U.S. Energy Information Administration, 06.02.2024. Available at: https://www.eia.gov/outlooks/steo/data.php?type=tables (accessed 20.02.2024).

3. Tight Oil Production Estimates by Play. U. S. Energy Information Administration, Monthly. Available at: https://www. eia.gov/petroleum/data.php#crude (accessed 20.02.2024).

4. Spot prices. U.S. Energy Information Administration. Available at: https://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm (accessed 21.03.2024).

5. Merger of ExxonMobil and Pioneer Enables a Unique Value Creation Opportunity. ExxonMobil Investor Update, 11.10.2023. 8 p. Available at: https://investor.exxonmobil.com/sec-filings/all-sec-filings/content/0000950103-23-014892/0000950103-23-014892.pdf (accessed 21.03.2024).

6. ExxonMobil to Acquire Companies Doubling Permian Basin Resource to 6 Billion Barrels. ExxonMobil, 17.01.2017. Available at: https://corporate.exxonmobil.com/news/news-releases/2017/0117_exxonmobil-to-acquire-companies-doubling-permian-basin-resource-to-6-billion-barrels (accessed 20.01.2024).

7. CEO Mike Wirth Talks Boosting Oil Production amid Record Demand. Chevron, 29.09.2023. Available at: https://www.chevron.com/newsroom/2023/q3/ceo-mike-wirth-talks-boosting-oil-production-amid-record-demand (accessed 24.10.2023).

8. Hess Raises Net Oil, Gas Production to Upper End of Guidance. Oil & Gas Journal, 25.10.2023. Available at: https://www.ogj.com/general-interest/companies/article/14300665/hess-raises-net-oil-gas-production-to-upper-end-of-guidance (accessed 25.10.2023).

9. Fitch Places Hess on Rating Watch Positive Following Announced Acquisition by Chevron. Fitch Ratings, 24.10.2023. Available at: https://www.fitchratings.com/research/corporate-finance/fitch-places-hess-on-rating-watch-positive-following-announced-acquisition-by-chevron-24-10-2023 (accessed 30.10.2023).

10. Chevron Corporation 2022 Annual Report and Form 10K. U. S. Securities and Exchange Commission, 31.12.2022. Available at: https://www.sec.gov/Archives/edgar/data/93410/000009341023000009/cvx-20221231.htm (accessed 05.01.2024).

11. U.S. Energy Information Administration Data. Available at: https://www.eia.gov/petroleum/data.php (accessed 28.10.2023).

12. Refinery Capacity Report with Data for January 1, 2023. U.S. Energy Information Administration, 21.06.2023. Available at: https://www.eia.gov/petroleum/refinerycapacity/ (accessed 22.03.2024).

13. Oil Market Report. International Energy Agency, January 2024. Available at: https://www.iea.org/reports/oil-market-report-january-2024 (accessed 20.02.2024).

14. S&P: US Heads into 2024 Producing More Oil than Any Country in History. Oil & Gas Journal, 19.12.2023. Available at: https://www.ogj.com/general-interest/economics-markets/article/14302942/sp-us-heads-into-2024-producing-more-oil-than-any-country-in-history (accessed 20.02.2024).

15. Annual Statistical Bulletin 2023. OPEC. Available at: https://asb.opec.org/data/ASB_Data.php (accessed 22.03.2024).

16. Concave Database. Available at: https://www.concawe.eu/refineries-map/ (accessed 22.03.2024).

17. Canada’s Trans Mountain Pipeline Expansion Reportedly 95% Complete. U. S. Energy Information Administration, 08.01.2024. Available at: https://www.eia.gov/todayinenergy/detail.php?id=61184 (accessed 20.02.2024).

18. National Oil Company Database. National Resource Governance Institute, 24.04.2019. Available at: https://resourcegovernance.org/publications/national-oil-company-database (accessed 20.10.2023).


For citation:
Kopytin I. Corporate Consolidation in The U.S. Oil and Gas Sector: Implications for the Global Oil Market. World Eñonomy and International Relations, 2024, vol. 68, no. 6, pp. 18-28. https://doi.org/10.20542/0131-2227-2024-68-6-18-28 EDN: JBKXJW

Contents World Eñonomy and International Relations. 2024, vol. 68, no. 6

Comments (0)

Show

No comments

Add comment







Indexed

 

 

 

 

Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies

 

Current Issue
2025, vol. 69, No. 4
Topical Themes of the Issue:
  • Entrenchment of Neo-Protectionism in Global Economy of 21st Century 
  • Institutional Dynamics of Fiscal Integration in the European Union
  • Factors of Latin American Countries’ Interest in BRICS
  • “China: Bitter Dish with Complex Garnish”
Announcement

Dear authors of the journal!

Please note that the author's copies of the issues in which your texts are published are kept in the editorial office for no more than one year. After this period expires, the editorial office has the right to dispose of unclaimed copies at its own discretion.

 

Submit an Article
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.

Scientific and Practical Seminar of IMEMO, RIAC
and the MEMO Journal