People & Money

Big Oil Profits Double, Hit $219 Billion in 2022

2022 was a blockbuster year for big oil companies across the world as they achieved historic earnings, with profits hitting more than $219 billion. According to the report by Reuters, the year was marked by fluctuating energy prices shaped by both Russia’s invasion of Ukraine and the climate efforts of several oil companies.

The profit boost allowed the oil corporations to expand their investment in oil and gas initiatives and provided an opportunity for certain firms to reevaluate their energy transition plans. The substantial profits also enabled some of the major oil corporations such as Shell, Chevron, TotalEnergies, Exxon Mobil, and others to distribute a staggering $110 billion in dividends to their shareholders in 2022. However, the massive profits have prompted demands from the public for governments to impose windfall taxes on the industry to alleviate the burden of rising energy costs on consumers. 

The Norwegian oil company, Equinor reported a doubling of its adjusted operating profit to $74.9 billion against the backdrop of surging gas prices in Europe. Equinor became the largest gas supplier to Europe after Russia’s GAZPROM cut off supply to most of the West. Also, British Petroleum (BP) recorded a historic $28 billion in profit in 2022 even as the company had to make a $24 billion exit from its 19.75% stake in the Kremlin-controlled oil company, Rosneft. TotalEnergies also recorded an all-time high profit of $36.2 billion.

Also Read: How Russia’s Invasion of Ukraine Will Impact Africa’s Energy Transition

The significant increase in oil and gas prices coincided with a decline in debt levels for many of the oil corporations. As the reduction in Russia’s oil and gas supply to Europe resulted in a boost in oil production for the majority of the companies.   

The worldwide environment remains highly advantageous for energy companies, with the easing of COVID-19 restrictions in China driving up demand for 2023. In an interview with Reuters, the CEO of TotalEnergies, Patrick Pouyanne noted “We wouldn’t be surprised to see oil back to $100 a barrel.” 

Against the backdrop of the remarkable success recorded by the international oil companies (IOCs), many of these companies are revising their strategies to reduce investments in oil and gas and increase investment in renewables. For example, British Petroleum which had laid out plans to cut down their oil output as well as cut down their carbon emission by 2030 is singing a different tune. 

According to their Chief Executive, Bernard Looney, “We need lower carbon energy, but we also need secure energy, and we need affordable energy. And that’s what governments and society around the world are asking for.” Per this strategic shift, BP revised its plan to reduce oil production, now targeting to produce 2 million barrels of oil equivalent per day by 2030, only a 25% decrease from 2019 levels, as opposed to the previously intended 40% reduction.

What’s In It For Nigeria?

For Nigeria, it remains to be seen what this potential shift in strategy may entail for the Nigerian oil industry. The country recorded its lowest oil output for years in 2022, and the oil output made a rebound in December hitting a 9-month high figure. However, according to a Reuters report, the rebound relapsed in January 2023 as Nigeria’s oil output fell by 50,000 BPD from December 2022. 

Also Read: When Is NNPC Declaring First Quarter Profits for The year 2022?

Against the backdrop of pipeline vandalization, insecurity, oil theft, as well as dried oil wells in the oil-producing region of Nigeria, many oil companies operating in Nigeria have been reducing their investment in the oil-producing region. Coupled with their global efforts on transitioning to renewables, the Nigerian oil sector has witnessed a significant shortfall in investments even as many oil companies are taking steps to wind up operations in Nigeria. 

With the new shift in direction by the IOCs and NNPCL’s effort at discovering new hydrocarbon reserves in the country, will Nigeria be a beneficiary of the new investment drive by these oil companies? 

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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