Energy supermajors look at diversifying oil and gas supplies to offset disruption risk
Oil supermajors bp and Eni posted quarterly results this week that boosted the industry and further made the case for diversifying supply.
While some energy sector revenues have been impacted by the Middle East conflict, bp reported first-quarter profit more than doubled year-on-year to $3.2 billion, its highest since 2023.
Italian oil and gas group Eni reported first-quarter adjusted net profit of $1.5 billion, down from $1.6 billion a year earlier.
Long-term supply streams
Both bp and Eni have benefited from oil price spikes caused by the US-Israel conflict with Iran and the closure of the Strait of Hormuz. Both also have diversity plays that can produce hydrocarbons away from that choke point.
Eni’s oil and gas production rose 9% in Q1, supported by projects in West Africa and Norway, start-ups in Angola, and robust operational continuity.
This growth helped offset Middle East disruption. Meanwhile, exploration added about 1 billion barrels of oil equivalent, with discoveries in Angola, the Ivory Coast, and Libya providing a positive outlook for the future.
Eni has been aggressively expanding its exploration portfolio, focusing on ‘near-field’ exploration to target new resources close to existing infrastructure and accelerate time-to-market.
This includes major gas discoveries in Indonesia’s Kutei Basin, Timor-Leste, and Sierra Leone, where Eni is committed to exploring offshore blocks. It also maintains gas interests in Kazakhstan and Mexico’s Sureste Basin.
Collectively, these projects could add 300-400 million barrels of new resources annually to Eni’s production base.
Reducing regional exposure
Similarly, bp has experienced limited disruption from the Strait crisis and maintains a reasonably diversified upstream pipeline with great potential. New CEO Meg O’Neill is set to further ramp up oil and gas investments. For instance, bp’s Bumerangue discovery in Brazil’s offshore Santos Basin, announced last year, potentially includes about 8 billion barrels of oil equivalent.
Other industry leaders, such as Shell, TotalEnergies, and ExxonMobil, also operate hugely diverse oil and gas fields, with geographically varied portfolios spanning offshore, LNG, and shale projects — across 70 countries in the case of Shell. US supermajors ExxonMobil and Chevron have production diversity via Permian shale and massive projects in Guyana and Kazakhstan.
These companies, along with bp, have been actively rebalancing their portfolios, combining legacy onshore oil with deepwater developments and LNG to hedge against market volatility.
High-impact exploration in vogue
Wood Mackenzie recently said ‘Big Oil’ is warming to high-impact exploration. Success in ultra-deep water projects — depths greater than 1,500 metres — can deliver substantial rewards.
This renewed focus follows a series of high-value-creating discoveries over the last five years, including ExxonMobil in Guyana, Eni in Cyprus, and TPAO in the Black Sea.
“Frontier explorers are widening the net to under-explored basins, including Brazil’s Foz do Amazonas, as well as extensions of existing plays in Angola, Suriname and elsewhere,” said Wood Mackenzie.
Despite these efforts, it revealed an “enormous and ongoing challenge” for the upstream industry.
“For liquids alone, today’s onstream fields will fall short by 300 billion barrels of the almost 1,000 billion barrels needed to meet cumulative demand through 2050 under our base case, absent reserve upgrades,” the analysts added. “Exploration can add not just volume but value by finding advantaged barrels to displace higher-cost or otherwise disadvantaged resources, whether oil or gas.”
