Upstream

Upstream manages the exploration for and extraction of crude oil, natural gas and natural gas liquids. It also markets and transports oil and gas, and operates infrastructure necessary to deliver them to market.

We need to discover resources and negotiate their extraction with governments and other stakeholders before operations can begin. Despite significant advances in technology, exploration risks remain high. We do not always find the oil and gas that we are looking for and may have to write off early investment costs.

When we find resources, we expect to invest significant sums in the development stages of projects in order to build required facilities and infrastructure. It may be several years before we realise any revenues as projects move through development and into production. Upstream projects often span decades.

We are exposed to market risks, among others, over the lifetime of a project and this impacts the taxes we pay. Low oil or natural gas prices may sometimes mean that upstream activities incur losses even during a production phase. In 2020 global oil demand weakened significantly as a result of COVID-19. Global demand was almost 9 million barrels/day below the level seen in 2019 (source: IEA).