Shorter-cycle Investments, Shift to Natural Gas and Adoption of New Technologies to Characterize Oil and Gas Industry in 2020

As 2019 draws to a close, Anna Belova, Senior Oil and Gas Analyst at leading data and analytics company GlobalData, looks at the key trends that will shape the industry in 2020, ranging from a stronger focus on gas developments to a push for shorter-cycle investments:

A push for shorter-cycle investments

“Oil and gas operators globally will continue to push for faster returns with shorter cycle investments, as the industry moves away from giant developments. Even with a large reserve base, smaller and phased developments are more likely in the future as compared to the ‘maximizing peak capacity at all costs’ projects of the past.

“Projects now go from final investment decision (FID) to first oil/gas in under 3-4 years, even for larger integrated developments with midstream components.

“Globally, this trend was observed with Zohr in Egypt recently and is expected for Liza in Guyana. Both are being developed with phased approach to building up capacity.”

Shift to natural gas

“Demand for natural gas will accelerate in 2020, as it will increasingly be used to replace coal and gas for power generation.

“Investments in liquefied natural gas (LNG) will continue to occur across different geographies, but the question will remain on how US LNG exports will impact the international trade via volume and price. Sustained excessive supply of natural gas combined with midstream constraints in the US has been depressing the gas price at the country’s main hubs, thus making the US LNG exports potentially very competitive on the global markets.”

Expectation of peak demand for oil

“Rise of electric vehicles (EVs) and shift to gas-powered electricity will put downward pressure on global oil demand.

“With uncertain long-term demand, oil and gas operators will shy away from high-cost oil reserves. Producers overly focused on high risk capital intensive projects and without diversified portfolios might find it difficult to survive in the reduced demand environment.

Adoption of new technologies

“Oil and gas can be written off as a mature industry, yet technological innovation continue to disrupt the industry. Advancements in drilling and fracturing methods allowed for production of hydrocarbons from previously untapped sources, such as ultra-deepwater locations or low-permeability shale formations. Shale oil production in the US ultimately changed the global oil and gas geopolitical landscape.

“New technologies, ranging from artificial intelligence (AI) enabled drilling to remotely-controlled production facilities will allow for reduction in production costs, while driving capital and operational efficiencies.”

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