Published Nov 24, 2020 by Javier Vargas
Houston has long been revered as the world capital of the energy industry. The region remains one of the largest energy economies with 4,600 energy companies and 18 Fortune 500 energy headquarters.
But the COVID-19 pandemic, which has presented unique challenges for cities around the world, has had a particularly strong impact on Houston's energy industry.
Senior executives of some of the world’s leading energy companies discussed the current state of the industry at the Partnership’s State of Energy event on November 10. The panel discussion was moderate by Partnership Chair Bobby Tudor of Tudor Pickering Holt and Company and included Gretchen Watkins, President, Shell Oil Company; Steve Green, President of North American Exploration and Production, Chevron Corporation; and Loic Vivier, Senior Vice President of Performance Derivatives, ExxonMobil Chemical.
The arrival of the COVID-19 pandemic caused a dramatic decline in demand for oil. As a result, oil prices hit an all-time low in April and energy employment in Houston plummeted to the lowest levels in 16 years. Companies took swift action by reducing costs and looking at how to best allocate capital and assets to ensure returns for investors and shareholders.
While this is certainly a unique time, the energy industry is extremely resilient and is no stranger to a downturn. Population growth across the world means demand for energy will continue to increase, but perhaps not at the same pace that was previously forecast.
“The world needs more energy,” said Vivier with ExxonMobil Chemical. “We are very optimistic about the state of the energy industry in the long-term, but we need to deal with the short-term contraction.”
In addition to focusing on investments that will generate cash flow in the short term, some are looking at the long-term opportunities to diversify their portfolio and meet the demand for climate friendly solutions to power and energy.
“We are very focused on the energy transition,” said Shell's Watkins, “not just because we want to be part of the solution to combat climate change, but because we want to find commercial opportunities and allow our company to continue to thrive.”
For many companies there is now a precarious balancing effort to maintain returns while also decreasing environmental impact of operations. Investors have become more vocal over the years about climate change, with many funds investing into their own ESG departments and even creating new funds that specifically invest in this type of activity. Companies are also working closer than ever with their customers to collaborate on lowering their own emissions that might come from the products they produce.
The use of technology will also continue to be a strategic focus in reducing costs and increasing efficiencies as the industry recovers.
Despite the current downturn, companies are optimistic about the future, and Houston’s continued position as the backbone of the global industry.
Click here for more information on Houston's energy industry. For more on Houston's role leading the global energy transition, click here.
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