Gordon Ballard, head of the International Association of Oil & Gas Producers, has seen many downturns in his 38-year career. But they were all followed by recoveries. This time, he fears, things may be different. “In the past, activity decreased then picked up again – each time, we saw it come back,” he said. “Now it’s not entirely clear if things just come back as normal. Everything has changed.” The coronavirus pandemic has crunched oil demand so hard that US crude prices fell below zero this week for the first time in history. With the industry in crisis, Mr Ballard sees two immediate challenges: continuing to get workers to remote offshore sites to keep operations running, and ensuring companies have the financial resilience to survive.
Big Oil already faced an uphill struggle ahead of the crisis. European majors such as Royal Dutch Shell and BP had promised shareholders they could do it all – become more efficient, produce oil and gas at higher margins, pay down debt and ramp up dividends, all as they transitioned to being cleaner-energy businesses. But a darkening global economic outlook was making their pledges trickier to deliver.
Coronavirus has now forced them to make trade-offs unthinkable just two months ago as they slash capital spending and operational costs, suspend share buyback programs, delay project approvals, issue debt and secure new credit lines. Most majors until now have pulled out the stops to preserve their