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Hello readers,
Happy new year to all. As Murray mentioned in the previous edition, I’ll be running this newsletter from now on. I think it’s safe to say I’ve taken over the reins at an intriguing time for the oil and gas sector. Here’s my take on news from December and the volatile start to 2026.
Buoyed by Donald Trump’s return to the White House and rising demand for energy amid the AI boom, industry giants are doubling down on their traditional operations. Fortunately for them, climate action seems to have slipped down the world’s priority list as wars and geopolitical turmoil take centre stage. As of early January, around 70 countries had still not submitted their decarbonisation pledges to the UN, including the likes of India and Argentina (as a reminder, the deadline was initially February 10, 2025).
Yet the climate crisis hasn’t disappeared. 2025 was tied for the second-warmest year on record, according to preliminary calculations by the Copernicus Climate Change Service. It also proved to be one of the costliest years for climate disasters, according to a report published by Christian Aid. We can expect more of the same in 2026, which is likely to rank among the hottest since measurements began.
Please share this newsletter with your colleagues and contacts, who can subscribe here.
Thanks,
Nick Hedley
Oil and gas in the transition
Fossils fuel instability
The big news, of course, is the US capture of Venezuelan President Nicolás Maduro, ostensibly on drugs and weapons charges. The Trump administration has made it abundantly clear, however, that it wants control over the South American nation’s vast oil reserves – the world’s largest. While the US has become the biggest oil producer on the planet thanks to the shale revolution, its refineries were configured to process heavy crude from Venezuela and other countries, meaning it still relies on imports.
Since rebuilding Venezuela’s dilapidated oil infrastructure won’t be easy or cheap, Trump has suggested that the US may subsidise American investments there. He reportedly sees Delcy Rodríguez, the former Venezuelan vice president who has taken over from Maduro on an interim basis, as the best person to facilitate US-friendly oil and gas deals. The industry itself agrees, and now that Rodríguez is at the helm, “everyone is looking at what opportunities there may be in Venezuela,” says Trafigura Group’s global head of oil, Ben Luckock.
Nevertheless, with crude prices low and the risk of instability high, analysts say any recovery in Venezuela’s output will take many years. In the meantime, the beleaguered country “will be turning over” up to 50 million barrels of oil to the US, Trump says. The American president now has “his very own oil empire”, says Bloomberg’s Javier Blas. One thing is obvious: The divergence between petrostates – including the US – and electrostates like China is only growing.
Exacerbating an oil glut
If Venezuela does manage to ramp up output any time soon, this would compound the global oil glut. Supply was already set to exceed demand by around 3.8 million barrels per day in 2026, according to the International Energy Agency’s latest forecasts. The imbalance is due to rising production in the US and among OPEC+ members, and slowing demand growth, which is partly linked to the rise of electric vehicles.
As a result, a barrel of Brent crude now costs approximately USD 60, down from around USD 80 a year ago. ExxonMobil said lower prices reduced its fourth-quarter earnings by between USD 800 million and USD 1.2 billion, while Shell warned of a similar hit to profits.
A Venezuelan oil renaissance would only put more downward pressure on prices. But getting the country back to its early 2010s output levels, of nearly 2.5 million barrels a day, will probably cost between $80 billion and $90 billion over six or seven years, according to researchers at Columbia University’s energy think tank.
Nevertheless, it’s evident that the oversupply of oil, together with the fact that much of the market is now under US control, has given Trump more room to take aggressive action in places like Iran and Venezuela. Spare capacity in the system means sanctions and airstrikes are now less disruptive to the global oil trade.
Actually, Asia might not want all that LNG
Southeast Asia was supposed to be the next big market for LNG exporters in North America, Australia and the Middle East that need robust long-term demand to soak up all the new supply they’re bringing online. But producers may well be left disappointed, even though some analysts think low LNG prices will stimulate demand in the region.
Despite commissioning a wave of new import terminals, LNG demand in ‘emerging Asia’ probably declined in 2025, according to this analysis, which notes that terminals are significantly under-utilised. One of the reasons is the region’s ongoing solar energy boom, which is reducing the economic viability of gas-fired power plants. Thailand’s draft electricity plan sees a surge in renewable energy installations and a decline in gas capacity ahead, and Pakistan has already provided a case study of what happens when the cost of solar panels plunges.
Meanwhile, things aren’t much different in Europe. While the EU recently agreed to buy USD 750 billion worth of US energy products by 2028, analysts say this will be impossible to meet given that European gas demand is in permanent decline.
Australia tries to reduce domestic gas prices
The Australian government says LNG exporters will have to reserve some gas from new projects for domestic consumers in the country’s east, who face shortages and rising prices as producers prioritise more lucrative international markets. But some Aussie fossil fuel groups are complaining that the new reservation policy will deter investment (spare a thought!).
Another potential lifeline for gas in the US
The Trump administration is suing two Californian cities – Morgan Hill and Petaluma – over their laws restricting gas infrastructure and appliances in new developments. Justice Department attorneys say the local rules, in place since 2019, violate a decades-old law barring states and cities from regulating the “energy use” of products overseen by federal standards. This comes as Trump ramps up his assault on clean energy, having recently paused leases for offshore wind projects under construction off the country’s east coast, saying they create security risks.
Energy transition strategies
Actions
BP has appointed a new chief executive to oversee its shift back toward climate-wrecking products. Meg O’Neill joins from Australian fossil fuel group Woodside, which embarked on an ambitious output expansion strategy under her leadership. She’s a defender of fossil fuels and critic of climate activists, which means she’s seen by many as the perfect person to steer BP back into the 20th century. Bloomberg has labelled her “a torchbearer for the oil and gas industry”. As a reminder, BP recently abandoned its clean energy ambitions and said it would instead ramp up its fossil fuel output. On that note, the company was the most aggressive bidder in the US government’s latest offshore oil and gas lease sale.
In another sign of the times, ExxonMobil has reduced planned investment in low-carbon activities to USD 20 billion over the next five years – down from the USD 30 billion goal it previously set. Chief executive Darren Woods told the Financial Times the company needs to pare back spending on clean energy because of tepid customer demand for things like hydrogen and biofuels, as well as a lack of policy support from governments for new (greenwashing) technologies. Yet the company sees opportunities to directly power data centres with gas-fired plants fitted with carbon capture units.
Chevron says it will spend USD 1 billion on “lowering the carbon intensity of operations and growing new energy businesses” in 2026 (that’s a mere 5% of total capital expenditure for the year).
… and words
Meanwhile, the world’s oil cartel has suggested we should drop the term ‘fossil fuels’ altogether, because it doesn’t like to be seen as the bad guy. “The reality is that rather than being a term of scientific precision, too often, ‘fossil fuel’ is bandied as a slur, a derogatory way of dismissing energy sources,” says OPEC secretary-general Haitham Al Ghais. “It feeds into a narrative that some energies are morally superior to others, distorting what should be discussions on reducing greenhouse gas emissions into a misguided debate about replacing energy sources.”
This would certainly make greenwashing an easier task for oil majors. In that regard, a new analysis by the Center for Climate Integrity shows how BP, Chevron, ExxonMobil, and Shell spent 25 years running deceptive advertising campaigns “to falsely reposition themselves as partners in the fight against climate change”. But don’t worry, a new name for their products should keep the critics at bay.
Clean energy investments
While the fossil fuel industry is cashing in on the populist anti-decarbonisation agenda sweeping the globe, some low-carbon investments are still being made.
TotalEnergies has agreed to sell solar energy to Google in Malaysia to help power the tech giant’s data centres there. The energy group and its partners will start construction on the solar farm early this year.
And Ecopetrol, Colombia’s state-owned oil company, is going ahead with a 205-megawatt wind farm in the northern department of La Guajira.
