3E Intelligence

In the UK’s Independent, David Strahan, the author of the excellent book “The Last Oil Shock: a survival guide to the imminent extinction of petroleum man”, uses new rumours of an imminent merger of Royal Dutch Shell and BP to make the case that the big oil majors are facing difficult times.

The real motivation behind a Shell-BP merger would be “desperation”, writes a pessimistic Strahan. Both companies but also others like ExxonMobil and Total have problems replenishing their oil reserves as all of them are “restricted to operating in non-Opec countries where oil production is generally already in decline“.

Strahan quotes IEA’s chief economist, Fatih Birol, who said in a recent interview with Le Monde: “The supermajors will be in difficulty. They will no longer have access to new production capacity. They must redefine their strategies, or otherwise, if they remain concentrated on oil, they will have to be satisfied with niche markets“. Or,in the words of American energy consultant Henry Groppe: “The major, publicly traded oil companies are in long-term liquidation.”

Strahan concludes that, if and when the merger between Shell and BP would take place “the deal will be lauded for busting all stock market records. But it should also be seen for its real significance: a warning light for the imminent peak of non-Opec oil production.”

Further reading:

  • The Energy Bulletin had a very good review of Strahan’s remarkable book last month. As I am reading the book myself, I can seriously recommend it to anyone wanting to know more about the political implications of the imminent oil supply/demand crisis.
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