After years of growth, the Oil, Gas & Offshore (Renewable) sector continues to face a major downturn. Falling global oil prices and derived gas prices have led oil investors and NOCs to significantly decrease investment in the exploration and development of wells. Rig counts are still down and this is expected to be the new status quo for the next few years. Even though demand is expected to exceed supply in the nearer future, it will be met by onshore US shale oil before new offshore developments become profitable again.
As a result, margins have decreased significantly, consolidation is taking place and cost cutting and efficiency programs have been rolled out. In the meantime, OPEC is committed to decreasing supply in an attempt to ‘stut’ the oil price, although this is only a temporary measure. Due to efficiency programmes, onshore shale oil projects are breaking even at a significantly lower level to bring supply on and take it off again, making onshore shale oil the swing factor in balancing demand and supply globally.
In the meantime, the sector is retaining its talent. so it is ready to hit the ground running when investments increase again.
Offshore companies are now looking for new markets. North Sea decommissioning is an opportunity. Between 2020 and 2025, the majority of North Sea assets will be retired. Decommissioning is becoming the new buzz word, as is offshore wind. Is the sector becoming greener and less reliant on oil and gas? Global macro-economics, energy demand and the supply balance, as well as the public opinion, are all important factors. But only time will tell. If sustainability gains momentum faster than the oil price returns to $80 a barrel or oil equivalent, we might all be caught by surprise. Are you ready for different scenarios?
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