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Global oil & gas – geopolitical, production and supply issues among industry challenges and trends


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12 August 2014:  Changes in the oil and gas production mix, shifting degrees of national dominance and demand, and a need for new megaproject management strategies are just some of the issues confronting oil and gas producers and resource owners – around the world and in Australia.

Deloitte’s Oil and Gas Reality Check 2014 report takes an overarching view of five key topics and outlines the challenges each may present to the industry.

The report’s overarching theme emphasises expansion and contraction on a number of fronts:

  • Global – the waxing and waning of dominance among suppliers
  • Supply – the progression from regionalisation to globalisation in natural gas markets – and the reverse in oil markets
  • Mix – the growing shares of some fuels and the declining roles of others in the global energy mix
  • Production – the swelling of capital projects to ‘mega’ proportions despite, or perhaps because of, shrinking returns
  • Nationalism – the opening and closing of borders in response to geopolitical concerns and shifting supply and demand conditions.

Deloitte Australia Consulting partner and national Oil and Gas Leader Mike Lynn, said the report represented the findings of a global team of Deloitte oil and gas experts, supplemented by expert perspectives from clients and industry executives.

“Another year has brought further changes to the global oil and gas industry’s fundamentals, including expansion and contraction on a number of fronts,” he said.

“In this report, we have assessed the fundamental characteristics of the trends – macroeconomic conditions, demand-supply balance, regulatory constructs, cost components, commodity prices, competitive behaviour, the impact of geopolitics, and the related use of energy as a diplomatic tool.

“These issues are certainly relevant from a local perspective. Australia will soon find itself in close competition with its key strategic ally, the United States, for future energy markets in China. We are a world leader in LNG megaproject execution, and we are emerging as an energy exporting nation.”  

Global energy: North American revolution

The North American energy revolution, and the US shale boom in particular, has brought the country closer to relative energy self-sufficiency, and the ripple effects from this shift in US status from major importer to soon-to-be exporter are now reaching the Middle East, Russia and China. Some fear this growing feeling of independence will translate into greater isolationism, but Deloitte believes this is unlikely.

Energy supplies: New sources, new geopolitics

Increased US domestic output, as well as production growth in Canada, Mexico, Brazil and Kazakhstan, will re-shape global oil and gas markets and the geopolitical landscape. The dominance of traditional producers, will be challenged, and they will be forced to compete more aggressively to maintain their market share and influence. Future developments in Asia Pacific oil and gas markets will be driven by what China, does next to meet its growing energy needs and to enhance its energy security.

Energy mix: A change in the global order

The global energy mix is shifting toward cleaner fuels such as natural gas, with only Asia running counter to the global “dash-for-gas” as it remains dominated by coal. While natural gas markets are becoming more international, the global oil trade is moving toward regionalisation.

Energy production: Oil and gas megaprojects call for new project management strategies

New-age megaprojects will continue to remain an integral part of the oil and gas industry’s growth strategy over the long-term as conventional fields decline and shale growth moderates. Modern megaproject strategies should, at a minimum, include: enhanced upfront engineering and planning, an agile project monitoring and evaluation methodology and increased integration and collaboration between project participants.

Energy nationalism: Driven by greed, fear, and pride

Control of the resource is the dominant theme. The new energy nationalism is being driven by greed for markets amongst former and emerging exporters and fear about energy security among nations with substantial demand. Long-restrictive borders are opening up, national market champions face competition and infrastructure investments will grow.

Access Deloitte’s Oil and Gas Reality Check 2014.

NB: See our media releases and research at www.deloitte.com.au

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Contacts

Name:
Mike Lynn
Company:
Deloitte Australia
Job Title:
Partner, National Oil & Gas Leader
Phone:
Tel: +61 8 9365 7125
Email
mlynn@deloitte.com.au
Name:
Simon Rushton
Company:
Deloitte
Job Title:
Corporate Affairs and Communications
Phone:
Tel: +61 2 9322 5562; M: +61 450 530 748
Email
srushton@deloitte.com.au

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