Oil Companies Post Record Losses Following Pandemic

In yet another blow for the oil and gas industry, energy giant Royal Dutch Shell has reported huge losses in the wake of the coronavirus pandemic. New data has revealed the British-Dutch multinational recorded a net loss of US$21.7 billion in 2020 after COVID-19 triggered a worldwide slump in demand. This equates to around £16 billion and represents one of the biggest annual losses in British history.

While some analysts were expecting Royal Dutch Shell to report the biggest ever UK corporate loss, the £16 billion figure didn’t come close to the staggering £30 billion loss recorded by Royal Bank of Scotland during the banking crisis of 2008.

Energy industry hit hard by COVID-19

The announcement comes just weeks after BP confirmed similar losses, reporting a deficit of more than US$18 billion in 2020. This marked the first annual loss in 10 years, a dismal milestone for the British-owned company. Exxon Mobil didn’t escape the wrath of the pandemic, reporting an annual loss of US$$22.4 billion. Shell admits that "significant uncertainty" lies ahead and the coronavirus pandemic will continue to hinder demand for oil and gas.

The gloomy figures drew overcast comments from analysts, with Warwick Business School professor David Elmes commenting, "This week's huge losses by Shell, BP and Exxon reflect the challenges oil and gas companies face. They are skating on ever-thinning ice as the effects of climate change combine with other events like the Covid-19 pandemic."

Shell set to slash jobs and accelerate clean energy transition

There are serious concerns over jobs, with Shell warning up to 9000 employees around the world will be laid off because of the pandemic. A recent announcement confirmed 330 of these would be from its North Sea rigs, suggesting a slowdown in offshore operations.

For oil and gas giants such as Shell, the pandemic has accelerated the transition to clean energy. Climate change was already forcing energy companies to pivot away from fossil fuels and towards more sustainable solutions. The slump in demand triggered by the coronavirus pandemic has fast-tracked the transition and forced energy companies to reconsider their priorities.

"There will be some ongoing need for oil and gas as a fuel for a while yet,” adds Elmes. “There will also be demand for the petrochemicals and other products made from them. But that can't sustain the industry we've seen in the past as we look to address climate change."

To find out more about how climate change is reshaping the global energy industry, don’t miss ‘The Prospective Approaches to Limit Global Carbon Emissions and the Adverse Effects of Gaseous CO2’ with insight from Dr. Raj Shah on behalf of Koehler Instrument Company.