Global oil majors defend record high profits during energy crisis

BP chief executive Bernard Looney warns against energy market interventions

Bernard Looney, chief executive of BP, speaking during an Adipec session. Chris Whiteoak / The National

Global oil majors went on the defensive at the Adipec energy summit in Abu Dhabi on Monday as pressure from governments and consumers to boost spending in the energy crisis increases.

Major oil companies have more than doubled their earnings in the latest quarter as oil prices hover around $95 a barrel, about 12 per cent higher than levels seen last year.

US oil major ExxonMobil’s third-quarter profit of $19.66 billion nearly matched that of Apple’s $20.7bn profit in the same period.

“It's quite understandable that at a time like this, people look at a company like ours and see the profits that we're making,” Bernard Looney, chief executive of BP, told the Adipec energy summit on Monday.

“We have to realise that a lot of people are facing a very difficult winter ahead in the UK, Europe and right across the world … our job is to pay our taxes [and] invest.”

Europe is experiencing its worst energy crisis in history after Russia, the world's second-largest energy exporter before the Ukraine war and the continent's biggest natural gas supplier, reduced its exports in response to the EU’s wide-ranging economic sanctions.

“The volatility and the cycles are not great for the global economy,” said Russell Hardy, group chief executive of Vitol, the world’s largest independent oil trading company.

“We'd like to think that we solve some of the problems rather than create them ourselves,” said Mr Hardy.

The energy executives also discussed coming sanctions on Russia’s energy sector, aimed at dealing another blow to the country’s finances as it continues with its war in Ukraine.

Energy markets are going to enter another phase of uncertainty once an EU ban on Russian crude comes into effect on December 5. A ban on Russian oil products will commence from February 5.

The Group of Seven countries, the G7, is working to cap the price of Russian oil and related products.

“Market interventions are by definition complex and they can have unintended consequences,” Mr Looney said.

A price cap could make energy affordable “for a moment”, but the natural gas may not arrive at the place “it is needed the most”, he said.

“The reason natural gas is flowing to Europe today is because Europe is paying a higher price than what China is paying for that same liquefied natural gas,” Mr Looney said.

While most European countries have met or exceeded their gas storage levels for the winter, traders and industry heads have raised concerns about 2023 as Russian exports dwindle.

The production available to Europe in the first half of 2023 will be much lower than in 2022, Mr Hardy said.

LNG imports, a big part of Europe’s plan to replace Russian gas, have been put at risk by rising Asian demand and a lack of regasification facilities in Europe.

Italian energy company Eni is looking to replace 80 per cent of its Russian gas imports by 2023, its chief executive Claudio Descalzi said.

Europe, which relied on Russia for 75 per cent of its natural gas imports before the conflict, is searching for energy sources and that has included boosting LNG imports from the US and restarting coal-fired power plants.

“Europe has no energy; we don’t have any domestic production,” Mr Descalzi said.

US oil and gas producer Occidental Petroleum’s chief executive Vicki Hollub backed the Opec+ decision to cut output by 2 million barrels per day.

“The answer to bringing prices down is to balance the supply and demand … that's the best way to ensure that we provide our energy at low cost,” Ms Hollub said.

“We're in a kind of unique situation right now, having come through the pandemic, and having had such low investment leading into the pandemic.

“There's just a lot of things going on right now, and I think governments really need to be careful about the decisions made during this kind of volatility.”