After a period of weak and volatile energy prices caused by an unprecedented production increase from North America unconventionals, there are early signs of an oil price recovery. This has accelerated an industrywide strategic repositioning by companies in response to technology advances and industry disruptors. A complex series of related factors need to be considered, including relative economics of divergent resource types, aboveground terms and conditions, geopolitical conflict, global climate change initiatives, and uncertainty around future sources of financing. Our team explores ten upstream issues to watch through the end of 2018. View the interactive infographic or download your copy of the full report for additional details.
Here’s a sneak peek at five of the issues facing the industry:
1. Focus has shifted from newfield wildcat exploration to rebuilding positions in older basins. Exploration budgets continue to be constrained, with projected 2018 exploration spending nearly flat with 2017 levels. Focus has shifted from newfield wildcat exploration to rebuilding positions in older basins via whole basin strategies.
2. Evolving aboveground conditions will continue to both attract and deter foreign investment. Governments are expected to make further adjustments to fiscal terms, national oil company (NOC) roles, local content requirements, and other upstream investment terms - not all of them positive for investors.
3. NOC competition in domestic basins continues to heighten as sovereign parents move to address domestic energy market imbalances.
New basin openings and new licensing rounds in basins already open to foreign equity participation have delivered expanded opportunities for E&P companies that have retained an international growth strategy.
4. For the first time, the upstream oil and gas industry faces the threat of energy.
For the first time, the upstream oil and gas industry faces the threat of energy substitutes, including renewables, as a legitimate force within the competitive landscape.
5. Uncertainty in oil supply fundamentals will continue as key producing countries look to log 50-year highs and lows in crude oil production.
US crude oil production is forecast by IHS Markit to average 10.4 MMb/d in 2018, a level not seen since 1974. Estimated crude output for 2019 of 11.2 MMb/d would approach the all-time production highs achieved in the 1970–72 period.