Industry experts detail demand growth, investment trends at ONS

By Kurt Abraham, Editor on 8/31/2016

Emerging markets are going to be the single biggest factor affecting future oil and gas demand, said a major oil company official at an ONS (Offshore Northern Seas) conference session on Wednesday, in Stavanger, Norway.

“What drives growth in demand is emerging markets,” said Spencer Dale, group chief economist at BP. “All the time, we see more people being lifted out of lower incomes in many countries and placed into middle incomes. There is going to have to be enough dependable energy supply to support this movement.”

Another significant factor that Dale foresees changing world energy demand patterns is the development of further supply—be it oil or gas—in North America. “What we’re going to see is a very discernable shift in the flow of energy, with it now going from West (Western Hemisphere) to East (Eastern Hemisphere), rather than East to West,” explained Dale. “This is especially true, as the U.S. becomes more self-sustaining, and becomes a net exporter of energy.”

He noted that energy economists have been able to measure growth patterns in various fuels, and have reached some conclusions, accordingly. “We expect renewable energy to be the fastest-growing fuel in history—faster than oil ever grew, and faster than gas ever grew.” But Dale also said that he “fully expects” to see continued investment in oil and gas projects for some time to come.

Dale said that he sees two main challenges facing both nations and energy companies. “One, we need to shift toward more demand being supplied by a greater mix of clean energy, and by that I mean a mix of natural gas and renewables, And two, we also have to be able to supply greater amounts of affordable energy to nations that are emerging and creating extra demand [for oil and gas].”

Meanwhile, in an adjoining conference session, some clear trends on the oil and gas investment front are now appearing, said an M&A expert with one of Europe’s leading private equity investment firms.

“There are several clear-cut market factors at work,” said Arne Trondsen, senior partner for business development at HightecVision. “We are seeing financial institutions imposing restrictions on access to capital, and that, in turn, is causing divestment of non-core assets by some operators. In addition, larger units (producers) are being created through mergers and/or alliances. We’re also seeing acquisitions of weaker players by companies with healthier balance sheets. And the market, of course, is prompting firms to make sustainable capex and opex improvements.”

One of the more interesting ironies in the current global market can be found on the Norwegian Continental Shelf (NCS), said Trondsen, where bigger is not always best. “If you take a look at the data that we’ve compiled, you can see that the majors may be the biggest producers on the NCS, but they may not be the largest reserve-holders. That’s because they have focused on producing legacy assets; they’re not accumulating reserves for future developments.”

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