The prospect of crude remaining near the current $50 level is no longer a doomsday scenario for the world’s oil majors whose latest earnings announcements show that cost-cutting lets them turn a profit even at these price levels, The Punch reports.
BP, Chevron, ExxonMobil, Shell and Total have all published results in recent days, showing they pocketed $23bn in net profit in the first half of the year. Either they increased their earnings or at least returned to profit compared with the same period last year. The price of the international benchmark Brent crude averaged $51.7 per barrel in the first half of this year, up considerably from $39.8 during the same period last year.
While the profits are still less than half of what the firms turned in during the same period three years ago when Brent was trading at over $100 per barrel, they show that the major firms can survive profitably if crude prices stay at current levels, a scenario many now foresee.
For the moment, the oil majors have shelved costly projects like extracting crude from Canadian tar sands or tapping certain Arctic fields. However, in the future, they will have to face replacing their reserves at a profitable cost, something which may prove difficult in the medium term.