According to the Oil and Gas Reality Check 2015 report conducted by Deloitte Touche Tohmatsu Limited’s (DTTL), the ups and downs experienced by the oil industry will not affect the long-term trajectory of the sector. It will, however, speed up the unfolding trends in the industry. The report outlines 6 major issues currently affecting the sector. These include the evolving dynamics of national and integrated oil companies among many others.
- Evolving Dynamics of Integrated Oil Companies and National Oil Companies
At the present time, it is hard to imagine Integrated Oil Companies (IOC) not playing a vital role in the production and exploration of oil. However, it is possible for IOCs to lose their market shares to National Oil Companies (NOC). To prevent this, IOCs need to maintain their edge in the changing competitive scenario.
- Dropping LNG Prices
LNG prices were once a model of stability, but that is not true now. North America retains its natural trading advantage with Europe as natural gas trade-ins become more apposite in geographically proximate regions. Since the most efficient producers are likely to win global market share, the United States will have a competitive edge as their LNG breakeven points are lower.
- Shift in Supply-Demand Fundamentals
The fluctuating dynamics are creating a power play between traditional and new suppliers. United States continues to be a major producer of oil and gas despite the shifting energy trade patterns. Since USA is not an anchor market anymore, major oil suppliers around the world are finding new buyers.
Currently, OPEC supplies 32% of the world’s crude oil, but the organization’s market share is expected to fall by 5% in 2018 as US oil supply recovers. Although that share may recover, OPEC will temporarily cede power.
- Emerging New Trading Partners
With the evolving oil and gas supply and demand fundamentals, new trading partners are emerging worldwide. As the relation between these emerging partners strengthens, OPEC can extend its share in the European market.
- Investing in Innovation
Companies need to invest in advanced analytics to avoid cost and time overruns, as well as to enable agile project evaluation and monitoring. There are plenty of strategies they can use to meet long-term energy demand.