Post-pandemic demand and the Ukraine invasion delivered windfall profits for oil and gas supermajors—but the rebound was short-lived. Falling prices, rising volatility, and accelerating clean energy investment have exposed structural weaknesses. To stay competitive, incumbents must rethink strategy. Emerging and state-backed players are already leading the way, leveraging diversification and innovation to future-proof their positions.
BP logged a record $28 billion profit in 2022, which dropped to $13.8 billion in 2023 and $8.9 billion in 2024. Its fourth-quarter 2024 earnings fell 61% year-on-year—its weakest performance since 2020.
This downturn came despite BP scaling back its net-zero commitments to stabilize short-term earnings. The expectation that returning to hydrocarbons would boost profits has proven overly optimistic. It highlights the limits of legacy thinking—and the potential risks of underinvesting in diversification.
Chevron faced similar challenges. Its $36.5 billion profit in 2022 dropped 40% to $21.3 billion in 2023. Even as profits declined in 2024, it returned $26.3 billion to shareholders through dividends and buybacks.
Unlike BP, however, Chevron stayed the course, focusing on volume growth, particularly in its Permian Basin operations, where output rose 10% in 2023. This helped cushion the impact of lower oil prices. Still, its model remains rooted in hydrocarbons, with limited investment in lower-carbon tech—stable for now, but long-term competitiveness remains uncertain.
ExxonMobil, the largest U.S. oil company, posted a record $56 billion profit in 2022—the highest ever for a Western oil major. But in 2023, profit fell to $36 billion, though still beating expectations and showing strong cash flow despite volatility.
Exxon has recently doubled down on oil and gas, acquiring Pioneer Natural Resources in a $60 billion deal to expand U.S. shale dominance. It’s also investing in carbon capture and lithium—signaling a long-term bet on both hydrocarbons and emerging energy markets. This hybrid strategy shows that future resilience may depend on scale and adjacent technologies.
But it’s outside the traditional Western supermajors that the most notable evolution is happening. The Abu Dhabi National Oil Company (ADNOC) has recently registered record results: drilling revenue rose 41% to $1.2 billion, while ADNOC Gas posted a record $1.4 billion quarterly net income, driving a $5 billion annual profit.
The company credits its resilience to a diversified strategy, with expansions into LNG, petrochemicals, and digital transformation initiatives that generated $500 million in operational efficiencies in 2023. A key step in this diversification was the recent $16.3 billion acquisition of Covestro, a leading German chemicals company known for its sustainable chemical offerings and contributing around 5% to the country’s GDP. This move reflects a broader shift toward high-value, lower-carbon industrial products that are gaining prominence across the sector.
The company appears committed to maintaining this trajectory. ADNOC’s planned merger with Austria’s OMV—aimed at creating a $60 billion global petrochemical entity—further supports its long-term approach to broadening its portfolio and reducing exposure to commodity price fluctuations.
Diversification, however, must be measured. EDF, France’s largest utility firm, provides a cautionary tale. In 2022, it suffered a record $19.5 billion net loss as safety issues forced nuclear reactor shutdowns, requiring costly electricity purchases. By 2023, with more reactors operational, EDF rebounded to a $12 billion profit. Yet, impairments in its offshore wind investments underscored the financial risks even within fast-growing renewables. This highlights that clean energy investment is becoming essential, but without disciplined execution, diversification can backfire.
This kind of strategic misstep carries added weight in today’s volatile market. Brent crude spiked to $133 per barrel in early 2022, only to fall below $80 by year-end. In 2024, OPEC-led production cuts kept supply constrained, but weak demand growth capped prices—underscoring the uncertainty facing long-term fossil fuel decisions.
At the same time, capital is shifting. In 2023, global energy investment hit $2.8 trillion, with over $1.7 trillion directed toward renewables, electric vehicles, nuclear power, and grid modernization. For the first time, spending on renewable energy and electricity infrastructure surpassed investments in fossil fuels. That trend is accelerating as projections show that clean energy investment nearly doubled that of coal, oil, and gas in 2024.
Despite this shift, hydrocarbons continue to deliver near-term gains. The five largest energy majors returned more than $113 billion to shareholders in 2023—signaling discipline and a commitment to capital returns even as the broader system evolves.
But the momentum is clear: the energy landscape is changing, and legacy players that stick to the old formula may find themselves outpaced. Short-term returns are no substitute for long-term adaptability in a sector undergoing structural transformation.
Staying competitive will require more than scale. It demands agility—reinvesting today’s profits into diversified platforms, emerging technologies, and cross-sector partnerships. As the transition accelerates, energy leaders will be those bold enough to evolve ahead of the curve.
By Jose Chalhoub for Oilprice.com
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