Wood Mackenzie expects further large impairments to occur across the oil and gas sector, according to Angus Rodger, a director with Wood Mackenzie’s upstream research team.
Speaking after Royal Dutch Shell plc and BP plc’s impairment announcements, Rodger said major oil companies are going through a process of reassessing long-term oil price assumptions and investment hurdle rates as a result of the oil price crash and the coronavirus.
“BP and Shell are just two of the companies that have announced recent changes,” Rodger said in a statement which was sent to Rigzone.
“This process has further to run and we expect further large impairments to occur across the sector,” he added.
Luke Parker, Wood Mackenzie’s vice president of corporate analysis, said the impairment Shell announced is about more than an accounting technicality, or an adjustment to near-term price assumptions.
“It’s about fundamental change hitting the entire oil and gas sector,” Parker said in a Wood Mackenzie statement.
“Within this write down, Shell is giving us a message about stranded assets, just like BP did a few weeks ago,” he added.
“Just a few years ago, few within the oil and gas industry would even countenance ideas of climate risk, peak demand, stranded assets, liquidation business models and so on. Today, companies are building strategies around these ideas,” Parker continued.
Parker went on to say that demand might still grow from here but added that the corporate landscape is changing and “the majors are changing with it”.
Last month, Wood Mackenzie dubbed the latest oil price crash the worst in history. The coronavirus pandemic and an OPEC+ breakdown earlier this year have weighed heavily on oil prices.
Wood Mackenzie is an energy research and consultancy company based in Edinburgh, Scotland. The business traces its roots back to 1923.
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