S&P/ASX 200 Index (ASX: XJO) energy shares took a wallop during the early months of the COVID-19 pandemic.
The Oil Search Ltd (ASX: OSH) share price, as one example, crashed 71% from 10 January through to 20 March.
Santos Ltd (ASX: STO) shareholders didn't fare much better, with the Santos share price crumbling 66% over that same time.
Both of the ASX 200 oil and gas shares have made strong rebounds since that low. But both remain well down from their 10 January 2020 levels.
Despite rebounding 75% from the 20 March 2020 lows, Oil Search shares are still down 48%.
Santos shares performed significantly better, gaining 132% from the 2020 March lows. Yet they too are still down 20% from their January 2020 levels.
Image source: Getty Images
What this mega African oil project portends for Aussie oil and gas shares
With talk of 'peak oil' ramping up as the world gets serious about reducing greenhouse gas emissions, ASX 200 investors may be avoiding Aussie oil and gas shares for fear that the best could be behind them.
But those fears might prove highly premature.
The initial big rebounds in ASX 200 energy shares came as investors realised that the pandemic lockdowns and travel bans wouldn't last forever. Now international travel and some domestic travel remains restricted today. But as those restrictions continue to ease, demand for oil and gas to fuel the world's planes, ships and non-electric ground transport will ramp up over the medium term.
Longer-term, renewable energy sources powering EVs will gradually see the globe demanding less oil.
But, if the new mega African project by US oil giant Total SE (NYSE: TOT) is anything to go by, any major decrease in global oil demand isn't going to happen overnight. Or even close…
As Bloomberg reports:
The sheer size of the demand that oil companies are anticipating in a lower-carbon future explains why Total is ready to spend $5.1 billion to drill along the remote shore of Lake Albert in Uganda and build a 1,443-kilometer (897-mile) heated pipeline to transport the waxy crude for export at the port of Tanga in Tanzania.
Total estimates the project contains some 1 billion barrels of oil.
If that sounds like a lot of oil, it is. But that 1 billion barrels will only sustain the world's appetite for oil for roughly 10 days.
According to data from BP, the world burned through 98 million barrels of oil per day in 2019. And BP doesn't forecast that demand will disappear anytime soon.
Its rosier forecasts (from a low carbon viewpoint) see the world consuming 51 million barrels of oil per day by 2040. Or about a 48% decline.
Its 'business as usual' forecasts see only a 4% reduction in global oil demand by 2040, down to 94 billion barrels of oil per day.
Those figures do represent an alarming amount of carbon emissions. However, many in the fossil fuel industry are convinced that carbon capture (via new technologies) and offsetting (via planting trees) will still enable oil and gas companies to attain net-zero status by 2050.
Two leading ASX 200 energy shares
With the demand for oil forecast to rebound in the medium term as the pandemic is inexorably brought under control and to remain robust longer-term by BP's analysis, ASX 200 oil and gas shares could be in for another leg up.
I mentioned 2 of the leading ASX 200 energy shares above.
Oil Search has a market cap of $8.5 billion and pays an annual dividend yield of 1.8%, unfranked.
Over the past 12 months, the Oil Search share price is up 47%. That's well ahead of the 27% gains posted by the ASX 200. Year-to-date Oil Search shares have gained 7%.
Santos is an ASX 200 heavyweight, with a market cap of $14.7 billion. It pays a dividend yield of 1.3%, fully franked.
Santos shares have gained 55% over the past 12 months and the Santos share price is up 10% so far in 2021.
