Actinoid Group Industry Updates

Future of Oil and Gas Industry and energy transition outlook

Final energy consumption has increased by 35% in the last 15 years, while we only estimate a 7% growth between 2015 and 2030. Because of decreased production and population growth, as well as continuing gains in energy efficiency, it will become practically flat in the future.

Gas, followed by oil, will be the two most important energy sources by the conclusion of the projection period, according to our estimates. Over the next several years, continued investment will be necessary to keep output at the levels required to fulfil demand.

Emerging economies are projected to drive demand growth, with China, India, Southeast Asia, and Sub-Saharan Africa being the major growing areas. Demand will begin to diminish, with major drops in North America, Europe, the Pacific OECD, and, eventually, China. This is primarily due to developments in the transportation sector, which have resulted from a move toward electrifying household and commercial transportation, as well as the increasing efficiency of next-generation petroleum and diesel engines.

Manufacturing and building demand for direct oil is minor, but it is anticipated to decrease somewhat during the projection period, reaching 9EJ/yr (manufacturing) and 2EJ/yr (buildings) (buildings). Oil demand in the power industry will be approximately 8EJ/yr, down from 10EJ/yr currently. In the last 30 years, global gas demand has more than doubled. According to our estimate, it will continue to rise for another two decades, peaking in 2035 at slightly around 160EJ, a 14 percent increase over today. Following that, gas usage will gradually decrease.

As of now, the process of getting oil and gas out of the ground and to consumers accounts for 15% of worldwide energy-related GHG emissions. The single most significant and cost-effective option for the sector to reduce these emissions is to reduce methane leakage into the atmosphere.

Other regions' demand will continue to rise for a long time, with the following high points, rounded to the nearest whole number: Latin America, 10EJ/yr (2030); China, 20EJ/yr (2034); North East Eurasia, 36EJ/yr (2039); South East Asia, 8EJ/yr (2035); Middle East and North Africa, 26EJ/yr (2035); Middle East and North Africa, 26EJ/yr (2035); Middle East and North (2042). In most regions, the power generating industry will be the largest gas user, with manufacturing in India, China, and Latin America coming in second. Over the next 15 years, gas consumption in power generation will rise significantly, before levelling off and then falling rather steeply towards the end of the projection period, when wind and solar power begin to dominate power supply.

Over the projection period, global gas consumption for the buildings industry stays constant, despite declines in North America, Europe, and the Pacific OECD, and a substantial growth in consumption in Sub-Saharan Africa. In both relative and absolute levels, global gas consumption in manufacturing is increasing somewhat. Gas consumption in transportation will rise, particularly in shipping, where gas will account for 30% of total energy use in 2050.

The oil and gas business is faced with the strategic dilemma of balancing short-term profits with its long-term operating licence. Societies are clamouring for both energy services and pollution reductions. Oil and gas firms have excelled at supplying the fuels that are the foundation of today's energy system; the question now is whether they can also assist offer climate solutions.

Clean energy changes will influence every oil and gas firm, therefore everyone in the sector must determine how to adapt. The industry landscape is varied, and no single strategy solution will make sense for everyone.The Majors, seven huge integrated oil and gas firms with a disproportionate effect on industry practises and direction, receive a lot of attention. However, the sector is substantially larger: the Majors account for 13% of oil and gas reserves, 15% of output, and 10% of anticipated emissions from industrial activities.National oil corporations (NOCs), which are entirely or partially controlled by national governments, account for more than half of world production and an even higher percentage of reserves. Although there are some high-performing NOCs, many are ill-equipped to respond to changes in global energy dynamics.

So far, investment outside of oil and gas firms' primary business sectors has been less than 1% of overall capital expenditure. For the time being, there are little indications of a significant shift in corporate investment spending. Redeploying capital towards low-carbon enterprises requires both attractive investment possibilities in new energy markets and new skills inside the company for those companies wishing to diversify their energy operations.As things stand, top individual businesses spend roughly 5% on average on initiatives outside of core oil and gas supply, with solar PV and wind receiving the most funding. Some oil and gas companies have also moved into new areas by acquiring existing non‑core businesses, for example in electricity distribution, electric vehicle charging and batteries, while stepping up research and development activity.

To speed energy transitions, a significantly larger shift in total capital allocation would be necessary.