Turuk Oil and Gas

Oil and Gas Industry's Future of Critical Importance to the Global Economy

The oil and gas industry's tremendous economic contribution to many national economies makes it's future vital to the global economy.

Today, oil and natural gas play a pivotal role in the current global energy system. Approximately 31% of primary energy used globally is met by oil-based fuels while natural gas represents a further 21% of the total world energy supply.

Through the 2000s and up until last year, OPEC took a revenues-oriented strategy, believing that this oil constrained world had arrived and its oil was more valuable under the ground than on the market. Oil companies, too, responded to this world view by pursuing a business model that maximized adding as many reserves as possible to balance sheets and warehousing expensive assets

The shale boom in the United States and the Paris climate accords, however, have changed the industry’s outlook for the future of oil and gas. With the prospect that major economies like the US, China and Europe will actively try to shift away from oil at a time when the costs for producing oil from shale and other kinds of source rock as well as from conventional sources is declining through technological innovation, producers are coming to realize that oil under the ground might someday be less valuable than oil produced and sold in the coming years.

The World Economic Forum’s Global Agenda Council on the Future of Oil & Gas considers strategies that can be deemed to be robust for the oil and gas industry in a future 2°C world towards 2040 as well as most alternative futures

In its New Policies Scenario, the IEA projects that oil demand will rise by 14% from the 2014 demand of 90.6 million b/d to 103.5 million b/d by 2040. Overall, the global system will still be dependent on oil and natural gas for the majority of the energy required to fuel economic activity, with fossil fuels generally representing roughly 75% of total primary energy use in 2040. But this forecast is looking more questionable in light of changing global economic conditions, technology innovation and shifting demographic trends. Under a scenario where fossil fuel use is restricted to limit global warming to 2°C, oil use would be significantly more limited. The IEA’s 450 Scenario (consistent with a 50% probability for less than 2°C global warmings) projects global oil demand to rise slightly to 93.7 million b/d in 2020 but thereafter fall to 74.1 million b/d by 2040.

By comparison, coal consumption would fall 38% over that period and natural gas demand would rise 16%.1 According to Norwegian oil firm Statoil’s 2°C Renewal scenario, and assuming accelerated clean technology transitions, for instance, oil use would be about 15% lower than today at below 80 million b/d by 2040 and coal use would drop precipitously to only 14% of primary world energy demand. Under the Statoil scenario, natural gas would rise to 24% of primary energy, up from 21% today.