Forecast

U.S. proved reserves effectively unchanged

Despite an historically low, 54% decline in drilling activity, U.S. oil production was down just 7.6% on a year-over-year basis, averaging 11.318 MMbopd in 2020. The loss in U.S. output could have been more drastic, but OPEC+ did a masterful job of curtailing production during the year to support benchmark prices.

U.S. rig counts crash to historic lows

A meaningful recovery in U.S. drilling activity during 2021 will be hampered further by President Biden’s Executive Order that indefinitely blocks new leases and drilling permits on federal lands and waters for up to a year.

Worldwide E&P expenditures should increase 6.8% in 2021, recovering partially from a 25.3% collapse in 2020. The first coordinated global upturn since 2018 will be led by a stronger rebound in select International regions.

The oil and gas business had an exceedingly difficult time in 2020. There are signs that activity may be improving, but it’s hard to compare against a year that felt like rock bottom, and to forecast in the shadow of a pandemic.

On his first day as President, Biden recommitted the U.S. to the Paris Climate Agreement, rescinded the construction permit for the Keystone XL oil pipeline, and ordered federal agencies to begin reinstating over 100 environmental regulations rolled back by Trump—including ones governing methane leaks from O&G wells and greenhouse gas (GHG) emissions from vehicle tailpipes.

Over the long-term, the impacts of behavioral shifts due to COVID-19 are minor compared to “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles, whose impact is estimated to be three-to-nine times higher than the pandemic’s by 2050.

It is an understatement, to say that 2020 is the year that people want to forget—most people were “done’ with this year by about August. Nevertheless, it’s hard to ignore a year that was filled with so much impact, and which was deadly (Covid-19), tumultuous (oil market and prices) and unpredictable (politics, elections and regulation), often all at the same time. There were unprecedented social and business lockdowns in response to Covid-19 that killed demand. There were record-low oil prices and record-low rig counts that slashed activity. And there were record-high vote totals in the U.S., amid an election that just finally resolved itself on Dec. 14. Against this background, a core group of our editorial advisors has worked to assess the global E&P industry during the last 12 months, and attempted to foresee what may take place in the coming year. Some of the subjects tackled by our advisors include a look at how to boost the global LNG market; continued uncertainty for the UK Continental Shelf; the carbon intensity of reserves, as the next step to net-zero; the role that Norwegian firms are playing in developing technology that will help the industry to prosper; a look at some talented leaders that are impacting the industry in its time of need; the true impact of digital oilfield technology; and a look at an Arctic oil field of the future, which is developing now. We encourage you to read forward for all the details.

Most regions will see significant reductions in activity, although the Middle East and China seem to be faring better.

The catastrophic demand decline initiated by coronavirus lockdowns significantly damaged the U.S. oil industry, with oversupply, historically low storage capacity, and low prices. Operators responded by stacking rigs and shutting-in production.

As the world holds its collective breath over Covid-19, Canada’s oil patch has shifted drastically to pure survivalism. Most measuring sticks of industry health show historic lows, while lack of market access continues to hurt producers.

Global capex to grow moderately, but less than last year

Spending discipline slows drilling activity in shale plays

U.S. reserves reach new record-high

U.S. crude output surges, overproduction wallops gas prices

Canada re-adjusts to low prices, limited access

While attention is focused on the national elections, there are ominous policies gestating at the state and local government levels.

Improved offshore activity, coupled with significant conventional oil development programs operated by NOCs, should push drilling marginally higher in 2020.

U.S. on a downward trajectory as shale industry matures

As 2019 began, our editorial advisors, like many of us in the industry, had hopes for an improved market during the course of the year. Unfortunately, that has not come to pass, and 2019 will be remembered as the year that the U.S. shale revolution sputtered and leveled out. The confinement of the oil price in the low-to-high $50s for most of second-half 2019, for WTI crude, is remarkable. This also will be remembered as the year that OPEC+ frequently had to defer to the U.S., as the new swing producer, to help balance supply with demand. And while the “quieting” of U.S. shale should continue through most of 2020, there are some brighter spots in the global E&P market. There is ample evidence that offshore activity is slowly, but surely, improving, particularly outside North America. And conventional oil and gas, outside the U.S. and Canada, are showing some life, due in part to increased spending and activity by NOCs, particularly in the Middle East. Meanwhile, the six most senior members of World Oil’s Editorial Advisory Board again provide their thoughts on this year’s market and what might be in store for 2020. In the process, they examine a wide range of industry trends, including the pillars of success; the unique, continuous transition of the UKCS; hydrogen’s role in the energy mix; getting the message right to the public; going back to the top of the slide; and entrepreneurship helping to foster good energy policy.