Oil Giants Abandon Long-Cycle Projects Amid Rising Pressure

The global crude supply outlook has undergone a significant shift due to oil giants' asset sell-offs. BP and Equinor have finalized an agreement for BP to sell its stake in Canada's Bay du Nord deepwater project, which was once seen as crucial for Canada's offshore oil development.

The decision by BP to sell this high-potential project is not driven by the project itself but by a change in the industry's underlying logic. Major International Oil Companies (IOCs) are now shifting their focus from maximizing reserve scale to maximizing cash flow generation per unit of capital.

Zhang Yuxin, an analyst at Hongze Research, explains that European oil majors have collectively withdrawn from long-cycle, high-capital-expenditure projects over the past three years. This 'slimming down' among majors is a response to multiple pressures, including shareholder return pressure and uncertainty surrounding the energy transition.

The energy transition has pushed up the discount rate for long-term assets, making projects that will only reach full production after 2030 less attractive. Additionally, European IOCs are under pressure from carbon emission accounting, which increases holding costs for high-carbon intensity assets.