2025 might turn out to be a mildly active and transitionary year for the oil and gas industry as the world adapts to President Trump’s return to the White House, slow demand growth for oil and gas and a potential partial return of Russian oil and gas to the global market. But just how eventful the year might be will depend on how several key factors shake out in the months ahead.
Will Consolidation Continue at Similar Rates?
One big decision for American oil companies will be whether to further consolidate via merger and acquisition deals or focus on delivering within their current portfolio. Several big acquisitions closed in 2024, including ExxonMobil’s purchase of Pioneer Natural Resources, ConocoPhillips’ acquisition of Marathon Oil Corp. and Chesapeake Energy’s merger with Southwestern Energy Co. Now, some analysts fear oil prices will drop significantly in 2025 as OPEC+ returns more production to a market with already weak demand. American producers might choose to focus on cost cutting and higher shareholder returns with dividends and stock buybacks, limiting M&A activity.
Similarly, the International Chamber of Commerce in Paris will rule in the arbitration between ExxonMobil and CNOOC versus Chevron and Hess Corp. Chevron and Hess announced a $53-billion merger in October 2023. The merger includes the prolific Stabroek Block in Guyana, and ExxonMobil and CNOOC, the operator and one of the project’s partners, respectively, believe that they have the right of first refusal. The two companies emphasize that the value of the Stabroek Block has increased greatly since first discovery in 2015 and first production in 2019. Chevron and Hess believe that asset-level preemption rights do not apply to a corporate takeover.
The ICC will hold a hearing in May and issue a ruling before September 2025. ExxonMobil and CNOOC believe they should benefit from the uplifted value if Hess, as the third partner in the project, decides to sell out of the Stabroek Block, whether at the asset or corporate level. ExxonMobil said that it is not interested in acquiring Hess, whereas Chevron has hinted that its merger with Hess will likely not proceed in the face of a negative ICC ruling. There is already speculation that Chevron may acquire Galp Energia to position itself as one of the leading IOCs in Namibia, especially if the Chevron–Hess merger does not go through.
Will Operators Be Able to Make Headway in Africa?
Speaking of Namibia, TotalEnergies is targeting a final investment decision in 2025 for its Venus oil discovery, which has a capacity of 180,000 barrels of oil per day. CEO Patrick Pouyanné said Namibia has the potential to host more than five floating production and storage offloading units. Galp Energia, which claims to have found 10 billion barrels of oil resources in Namibia’s Mopane complex, might decide this year who will become its new partner to take over the development operatorship. Shell will write off some $400 million for its exploration wells in Namibia, which it feels are not commercially viable due to challenging reservoir conditions.
Meanwhile, it has been roughly 15 years since Anadarko Petroleum Corp. made its breakthrough gas discovery in Mozambique. Subsequent efforts by Anadarko and ENI have discovered more than 100 trillion cubic feet of gas in two offshore deepwater blocks; however, much of the gas resources remain undeveloped, except for a 3.5-million-tonnes-per-annum floating liquefied natural gas project led by ENI, which began production in 2022. TotalEnergies and ExxonMobil have since taken over operatorship of two separate major onshore LNG projects with a combined capacity of 31 million tonnes per annum.
If its potential is realized, Mozambique will become one of the key LNG exporters in the Indian Ocean, ideally located to supply the Indian and Southeastern Asian markets. That said, security issues stemming from local militia activities have previously forced TotalEnergies and ExxonMobil to delay their projects. TotalEnergies took FID in 2019 for the $20-billion onshore LNG project in Area 1 after it acquired the asset from Occidental Petroleum. It hoped to deliver first LNG by 2024, but security threats forced TotalEnergies to declare force majeure in 2021. The French major said that it hopes to restart contracted work in 2025. ExxonMobil has said it hopes to make significant progress for its stalled LNG project in 2025, targeting FID in 2026.
Can Namibia and Mozambique provide stable political and security environments for TotalEnergies and others to make significant progress in 2025, allowing Namibia to enter the market as a new oil exporter and enabling Mozambique to increase its LNG market role?
Will China Import LNG from the United States or Russia?
China is the world’s biggest gas importer, as its domestic production cannot provide much more than 60 percent of the country’s needs. China has been importing pipeline gas from three locations: Russia to the north, Turkmenistan and Kazakhstan to the west and Myanmar to the south.
Russia and China completed construction on the first Russia-China pipeline in 2024, which now supplies China with 38 billion cubic meters of gas per year. This pipeline has been slow to reach full capacity, partly due to lingering effects of COVID-19 supply chain issues. Russia hopes to construct a second big gas pipeline to supply annually 50 billion cubic meters more gas to China, but China has yet to reach an agreement on the proposed second gas pipeline.
President Trump’s return to the White House promises new tariffs on Chinese imports, and Trump wants to see China buy more American goods. If China were to decide to sign more long-term LNG contracts with American LNG producers, it would make significant headway in reducing the trade imbalance, totaling $280 billion in 2023 in China’s favor. Buying more American LNG or Russian pipeline gas would be an economic and geopolitical decision. China may favor the U.S. option, at least in 2025.