In efforts to limit global warming to 2°C by 2050, oil demand and prices are expected to fall rapidly later this decade. Gas demand and price, however, would be more resilient. While this range of outcomes has major implications for the oil and gas industry, in either scenario there is still a huge amount of upstream value on the table.
Using its global Lens asset-by-asset modelling, Wood Mackenzie estimates the range of pre-tax future valuations for upstream is a staggering US$14 trillion – from US$9 trillion to US$23 trillion.
Wood Mackenzie vice-president Fraser McKay said, “The industry now finds itself having to supply oil and gas to a world in which future demand – and price – are highly uncertain. The range of possible outcomes is dizzying. But the world will still need oil and gas supply for decades to come, and the scale of the industry will remain enormous.”
For the industry’s biggest players, new energies will play an increasing role, but this is not an option for many industry participants. “The industry will have to figure out the conundrum of weaker economics if the giant gas projects the world needs are to happen. The returns on developing a barrel of oil are currently higher, with oil-production and cash-flow profiles delivering more value upfront. Gas prices are lower than oil prices on an energy-equivalent basis; that relationship will have to invert as it does in our AET-2 scenario to make this happen,” said Wood Mackenzie research director Angus Rodger.
According to Fraser McKay, business models must adapt to maximise value as the oil and gas sector matures. Whether by bolstering margins, applying the right technology and retaining the right people, or strengthening bonds with stakeholders, companies need to exert more effort to make transition strategies easier to execute.
Delivery and discipline are paramount in all aspects of the upstream value chain as the macro environment for oil and gas gets tougher. Performance against budgets and timelines has improved dramatically since the last downturn. The industry needs to remain relentless in its push to improve efficiency, drive down costs and deliver projects flawlessly. Oil and gas companies need to send a strong signal to stakeholders that they can be reliable stewards of capital.
Worldwide energy transition to end oil supremacy
As the world shifts to cleaner energy resources, around $14 trillion of upstream oil and gas assets face uncertainty, a new report by Wood Mackenzie said
In efforts to limit global warming to 2°C by 2050, oil demand and prices are expected to fall rapidly later this decade. Gas demand and price, however, would be more resilient. While this range of outcomes has major implications for the oil and gas industry, in either scenario there is still a huge amount of upstream value on the table.
Using its global Lens asset-by-asset modelling, Wood Mackenzie estimates the range of pre-tax future valuations for upstream is a staggering US$14 trillion – from US$9 trillion to US$23 trillion.
Wood Mackenzie vice-president Fraser McKay said, “The industry now finds itself having to supply oil and gas to a world in which future demand – and price – are highly uncertain. The range of possible outcomes is dizzying. But the world will still need oil and gas supply for decades to come, and the scale of the industry will remain enormous.”
For the industry’s biggest players, new energies will play an increasing role, but this is not an option for many industry participants. “The industry will have to figure out the conundrum of weaker economics if the giant gas projects the world needs are to happen. The returns on developing a barrel of oil are currently higher, with oil-production and cash-flow profiles delivering more value upfront. Gas prices are lower than oil prices on an energy-equivalent basis; that relationship will have to invert as it does in our AET-2 scenario to make this happen,” said Wood Mackenzie research director Angus Rodger.
According to Fraser McKay, business models must adapt to maximise value as the oil and gas sector matures. Whether by bolstering margins, applying the right technology and retaining the right people, or strengthening bonds with stakeholders, companies need to exert more effort to make transition strategies easier to execute.
Delivery and discipline are paramount in all aspects of the upstream value chain as the macro environment for oil and gas gets tougher. Performance against budgets and timelines has improved dramatically since the last downturn. The industry needs to remain relentless in its push to improve efficiency, drive down costs and deliver projects flawlessly. Oil and gas companies need to send a strong signal to stakeholders that they can be reliable stewards of capital.
Staff Writer
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