After a long period focused on share repurchases, major oil companies are returning to drilling operations

Oil Giants Shift Focus Toward Expansion

After years of emphasizing shareholder payouts, the world’s largest oil companies are now making growth their primary objective. This shift comes as it becomes increasingly clear that oil and gas will remain essential for many years, defying earlier predictions of rapid decline.

For a long time, leading analysts and organizations, including the International Energy Agency (IEA), forecasted a significant drop in demand for oil and gas. These forecasts were based on expectations that electric vehicles would become mainstream, reducing the need for traditional fuels, and that renewable energy sources like wind and solar would quickly replace natural gas in power generation. However, these scenarios have not played out as anticipated.

While electric vehicles have seen widespread adoption in China, largely due to generous government subsidies, this has only slowed the growth of oil demand rather than causing it to peak. In other regions, EV adoption has lagged, with automakers facing substantial financial losses and even reintroducing diesel models in response.

Last November, the IEA revised its earlier outlook, no longer predicting that global oil demand would reach its peak before 2030. Given the influence of the IEA’s reports, this marked a turning point for major oil companies, who had already begun to move away from low-carbon ventures and refocus on their core fossil fuel businesses. Now, the industry is preparing to pursue ambitious growth once again, with shareholders supporting this new direction.

Industry Experts Highlight Growth Over Payouts

According to Biraj Borkhataria, an analyst at RBC Capital quoted by the Financial Times, investors are expected to prioritize expansion over distributions in the coming years. The main focus for oil majors this quarter is to increase their reserves, enabling higher production levels, even as some forecasts predict a short-term surplus in supply.

In recent years, the issue of replacing reserves took a back seat as supermajors experimented with low-carbon initiatives, with mixed results. These efforts were driven by a widespread belief among analysts that oil and gas had no long-term future. Now, as the outlook for hydrocarbons remains strong, replenishing reserves has regained importance.

Strategic Shifts and New Opportunities

Shell’s CEO, Wael Sawan, recently expressed regret over exiting Guyana too soon, stating that the company is now eager to pursue growth. U.S. oil majors are particularly well-positioned, both in Guyana and globally, thanks to a more flexible regulatory environment compared to Europe. This has allowed companies like Exxon, Chevron, and ConocoPhillips to invest more freely.

European oil giants are also adjusting their strategies, recognizing the need to demonstrate sustainable business models beyond simply increasing dividends. Shell is considering acquisitions to quickly boost its reserves, while BP has announced new oil finds in Angola. Norway’s Equinor is planning a significant international expansion to strengthen its resource base.

Financial Performance and Shareholder Expectations

Despite warnings of weaker financial results due to a 20% drop in oil prices last year, shareholders have not demanded a reversal of the current strategy. According to a senior analyst at S&P Global, the last measure oil companies would take is to cut dividends; instead, they may scale back share buybacks or adjust capital spending if necessary.

It’s clear that shareholders now see growth as essential to maintaining long-term dividend flows, a shift from the recent past when dividends were seen as the main reason to invest in oil companies. The focus on expansion is no longer a joke—it’s a necessity.

Looking Ahead: Market Predictions

Rystad Energy forecasts that 2026 will bring an abundance of upstream energy, though potential bottlenecks may appear downstream. They predict lower primary energy prices in the near term, but warn that a sharp rebound could follow in 2027 and 2028 as supply tightens.