In a virtual climate summit with 41 world leaders, President Joe Biden on Thursday unveiled an ambitious 10-year Climate Plan that has proposed cutting U.S. greenhouse gas emissions by 50-52% by 2030. That represents a near-doubling of the U.S. commitment of a 26-28% cut under the Obama administration following the Paris Agreement of 2015.
Biden, the convener of the summit, intended to use the meeting to coax emerging countries to become more aggressive with their emissions reduction goals. Or maybe he was trying to one-up a key figure at the meeting—China's President Xi Jinping who last year announced that the country had set a goal to become carbon neutral by 2060.
Luckily for Biden, Corporate America is already on the hook with his aggressive climate plan, with at least 400 companies led by industry titans such as Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, GOOGL), Microsoft (NASDAQ: MSFT), Coca-Cola (NYSE:KO), General Electric (NYSE:GE), General Motors (NYSE:GM), Edison (NYSE:EIX), Exelon (NASDAQ:EXC), General Electric (NYSE:GE), and PG&E (NYSE:PCG) having signed an open letter backing lowering GHG emissions by least 50% below 2005 levels by 2030.
Although the initial proposal will only offer broad strokes rather than a detailed breakdown, Biden's aggressive target has clearly laid down the gauntlet for the oil and gas industry, with fossil fuels being the biggest source of GHG. Related: Oil on Guard over Yemen as Saudi, Iran Meet in Secret
Oil remains, by far, the most dominant source of energy worldwide, with the EIA estimating that the world consumed 92.2 million barrels per day (b/d) of petroleum and other liquid fuels in 2020, despite a 9% decline due to the pandemic.
As the world's biggest polluters such as the U.S. and China become more aggressive with their climate goals, the biggest oil and gas companies that shoulder the biggest responsibility for GHG emissions and are likely to feel the heat the most.
Interestingly, the world's 5 biggest oil and gas companies (in terms of revenue) are from China and Europe, with U.S.' giants ExxonMobil (NYSE:XOM), Chevron Corp. (NYSE:CVX), and Marathon Oil (NYSE:MRO) coming in lower at #6, #8, and #9, respectively.
China and Asia are likely to extend their oil and gas dominance over their U.S. peers, given that a recent analysis by energy researcher Wood Mackenzie projected that oil demand in the Asia Pacific region could rise by 25% by 2040 compared to 2019's levels.
Here's a rundown of the 5 biggest oil and gas companies in the world.
#1. China Petroleum & Chemical Corp. (Sinopec)
- Revenue (2020): $407 billion
- Net Income (TTM): $5.1 billion
- Market Cap: $75.8 billion
- 1-Year Trailing Total Return 4.9%
China Petroleum and Chemical Corporation (NYSE:SNP), also known as Sinopec, is one of China's three state-owned oil companies and the largest oil and gas company in Asia Pacific and the world by revenue after bringing in revenue of $407bn at the end of the 2019-20 fiscal year. It's also the second-largest company listed on U.S. exchanges in terms of revenue, behind only Walmart (NYSE:WMT).
Sinopec's operations include oil and gas exploration, refining, and marketing, as well as the production and sales of petrochemicals. The company's products include gasoline, diesel, kerosene, jet fuel, synthetic rubbers and resins, and chemical fertilizers.
Sinopec's FY 2020 profit fell 42% Y/Y to 5.1B, the lowest since 2015 due to the global pandemic and extensive lockdowns. The company, however, expects the current year to be much better and says it plans to increase capital spending by 24% to $25.55B while raising refinery throughput by 5.5% this year to 250M metric tons, or ~5M bbl/day.
Sinopec says China is on goal to become the world's biggest oil refiner by 2025 with a refining capacity of 20M bbl/day, according to Sinopec's Economics & Development Research Institute.
#2. PetroChina Co.
- Revenue (2020): $296.3 billion
- Net Income (TTM): $2.9 billion
- Market Cap: $111.4 billion
- 1-Year Trailing Total Return: -0.26%
PetroChina Co. (NYSE:PTR) is the world's second-largest oil and gas company, currently holding assets in 30 countries across the globe. PetroChina--the exchange-listed branch of the Chinese state-owned China National Petroleum Corporation-- specializes in oil and gas operations, oilfield services, petroleum engineering and construction, equipment manufacturing, financial services, and new energy development.
PetroChina has unveiled plans to spend 239B yuan ($37B) in annual capital spending--the highest for any gas and oil company globally--in an effort to increase domestic production over the next five years and also to improve China's energy security.
#3. Saudi Arabian Oil Co. (Saudi Aramco)
- Revenue (TTM): $286.9 billion
- Net Income (TTM): $64.5 billion
- Market Cap: $1.9 trillion
- 1-Year Trailing Total Return: 1.4%
At a market cap of $1.9 trillion, Saudi Arabian Oil Co, or Saudi Aramco (TADAWUL:2222) is the world's most valuable oil and gas company, but only the third-largest in terms of revenue. Aramco is unusual on this list given that it's stock does not trade in the United States. However, it's a highly influential and major player in the global energy scene considering that it's the leading national oil company (NOC) of the king of OPEC, Saudi Arabia. Related: The Ugly Truth About Renewable Power
Aramco is the largest oil-producing company with a daily production clip of 3.2 million barrels and also owns the world's second-largest proven crude oil reserves of more than 270 billion barrels.
Aramco has reached an agreement to sell a 49% stake in its oil pipelines to an international consortium led by Abu Dhabi sovereign wealth fund Mubadala Investment and EIG Global Energy Partners for more than $12B. The deal represents another attempt to monetize Saudi Arabia's massive oil assets as the kingdom seeks to diversify its economy.
Saudi Arabia has been making aggressive investments in renewable energy, and has announced plans to forego LNG development in favor of hydrogen. Saudi Aramco remains OPEC's swing producer, and has lowered oil production by 1 million barrels per day in a bid to balance the market.
#4. Royal Dutch Shell Plc.
- Revenue (TTM): $180.5 billion
- Net Income (TTM): -$21.7 billion
- Market Cap: $144.3billion
- 1-Year Trailing Total Return: 8.4%
- Exchange: New York Stock Exchange
Netherlands-based, Royal Dutch Shell Plc. (NYSE:RDS.A) operates as an integrated oil, gas and chemicals company.
Shell remains one of Big Oil's least optimistic companies when it comes to the long-term oil and gas outlook.Shell says we might already be past peak oil demand and is bracing itself for a worst-case scenario: Demand to never fully recover.
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"I think a crisis like this has the potential to capitalize society into a different way of thinking, much as the Paris Agreement has had," company CEO Ben van Beurden has told investors.
Shell has also revealed that it expects ~75% of its proved oil and gas reserves to be exhausted by 2030 and nearly all by 2050.
Shell is massively pivoting away from oil and gas production and into green energy, including booking billions of dollars in losses due to huge asset writeoffs.
On a brighter note, Shell managed to double its crude and refined products trading profits in 2020 with earnings from the Oil Products division rising to nearly $2.6 billion from $1.3B the previous year. Shell managed to stay in the black despite an 87% plunge in profits thanks to the juicy trading profits
#5. BP Plc.
- Revenue (TTM): $180.4 billion
- Net Income (TTM): -$20.3 billion
- Market Cap: $82.3 billion
- 1-Year Trailing Total Return: 4.3%
BP Plc. (NYSE:BP) engages in the energy business worldwide, including oil and gas production and refinery, trade in natural gas; offers biofuels and operates onshore/ offshore wind power, and solar power generating facilities.
Like Shell, BP's trading arm has been doing roaring business during the oil crisis, making nearly $4 billion in 2020 and almost equalling the record trading profit in 2019. The profits were able to provide some support to the company's full-year results, with BP reporting a net loss of $5.7 billion, excluding writedowns.
BP has lately become less aggressive with its oil production and exploration, but still remains more active than the likes of Shell. A week ago, the company revealed that it had discovered oil at the Puma West prospect in the deepwater U.S. Gulf of Mexico, with preliminary data pointing to good potential for a commercial volume of hydrocarbons. BP operates Puma West with a 50% stake, with Chevron (NYSE:CVX) and Talos Energy (NYSE:TALO), each owning a 25% stake.
By Alex Kimani for Oilprice.com
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China and the Asia-Pacific will extend their oil dominance with their oil demand projected to rise by 25% from 37.0 million barrels a day (mbd) in 2019 compared with North America’s 24.0 mbd and Europe’s 15.0 mbd to 46.0 mbd by 2040.
Another major factor is that the power structure of global oil markets is already undergoing a major transformation exemplified by the rising power of the National Oil Companies (NOCs) and the declining influence and power of International Oil Companies (IOCs). In coming years, this power structure is set for a major shakeup if the IOCs can't replace their reserves.
This shift could be evidenced from a comparison of Saudi Aramco’s net income in 2018 with ExxonMobil and Shell. Saudi Aramco’s net income of $111 bn was almost 6 times that of ExxonMobil ($20.8 billion) or Shell ($23.4 billion).
Whilst top IOCs such as Total, BP, Shell, Chevron, ENI, ConocoPhillips, ExxonMobil, Equinore and Repsol have reserve to production (R/P) ratios ranging from 8.0-10.5 years according to CitiBank research, the NOCs of countries like Saudi Arabia, Iraq, UAE, Venezuela and Kuwait to name but a few have access to proven reserves whose R/P ratios range from 66-91 years at the 2019 production levels.
Resource nationalism has been on the rise around the world underpinned by governments wanting to fully control whatever hydrocarbons and mineral resources they have in order to maximize their revenues, growing global demand for these resources and also growing influence of the NOCs. That is why resource nationalism has become a major threat for the IOCs.
Resurgent resource nationalism represents the underlying factor behind the possible demise of some major IOCs in this decade.
Profit margins per barrel are also a major investment issue as IOCs have been looking at the more challenging environments, such as deepwater, offshore, Arctic, or shale, while NOCs still have major conventional reserves in place.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London