Oil Majors Told to Adapt or Die

At best, big oil companies such as ExxonMobil, Shell, Chevron and BP face a period of gentle decline, but will ultimately survive.

At worst, if they do not adapt and change direction, “what remains of their existence will be nasty, brutish and short”.

That’s the core message of a research paper on the oil corporates by one of the UK’s leading energy experts, Paul Stevens, a senior research fellow at the London-based Chatham House thinktank, the Royal Institute of International Affairs.

Present management strategies within the oil majors have failed to deliver value to shareholders, and profits are declining sharply, Stevens says.

Impact on climate
Meanwhile, growing public and governmental concerns over fossil fuels and their impact on the climate, together with a sharp drop in prices, are threatening the survival of the international oil companies (IOCs).

“The IOCs cannot assume that, as in the past, all they need to survive is to wait for crude prices to resume an upward direction,” Stevens warns.

“The oil markets are going through fundamental structural changes driven by a technological revolution and geopolitical shifts.  The old cycle of lower prices followed by higher prices can no longer be assumed to be applicable.”

Stevens says the business model adopted by the IOCs has failed.  They have to downsize, and many of their assets will have to be sold off.  Above all, the corporate culture of these once-mighty conglomerates has to change.

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