Deloitte Study: How to walk shale tightrope in 2020

By Luke Geiver | November 19, 2019

Entering 2020, the oil and gas industry will face unique economic, trade and political headwinds, according to the lead analysts at global research and consulting firm Deloitte. Duane Dickson, Deloitte’s U.S. Oil, Gas and Chemicals sector leader, shared his insights from a recent report compiled by Deloitte. Below is an outline of his takeaways from the report.

Oil and Gas Sector

Multiple headwinds are causing uncertainty for fuel markets in 2020

-Economic Headwinds: Deloitte forecasts that US GDP growth will slow in 2020, with a 25 percent chance of recession and only 10% chance that growth in 2020 will match recent years.

-Trade Headwinds: Trade disputes have expanded to include Asia and Europe, creating high debts and weak currencies in several countries.

-Regulatory Headwinds: Regulatory changes like IMO2020 could leave refiners pinched not by not having enough IMO 2020-compliant low-sulfur fuels, but by having too much product overall.

LNG volumes are up, but sanctioning new projects will be hard

-Once the current projects under construction are completed and fully-ramped up, exports could hit 10 bcfd over the next year or two.

-US LNG exports are facing a soft global gas market, which poses a bigger challenge for project developers looking to sanction in 2020.

Oil and gas investors are expecting increased efficiencies despite slowdown

-The market capitalization share of the global oil and gas industry fell to an all-time low of about 4.5 percent in late 2019.

-Investors are expected to watch how shale operators improve their capital efficiency and pay attention to how oilfield services and midstream providers, can help operators bring in new efficiencies and save costs without compromising their margins and sustainability.  

The energy transition is gaining momentum in the oil and gas sector

-The energy transition poses entirely new challenges for oil and gas companies, and could prove disruptive to long-standing market structures, value chains, customer preferences and the economic drivers for the oil and gas business. 

-Oil and gas companies will need to figure out how to produce more oil while also being carbon-conscious and addressing stakeholders’ sustainability concerns. There are four steps companies can take in the near term:

1. Identify low-hanging fruit for reducing GHGs, like eliminating methane leaks from existing infrastructure

2, Deploy renewables to reduce emissions from field operations

3. Evaluate opportunities to deploy CO2 enhanced-oil recovery to boost production while sequestering carbon

4, Invest in infrastructure to sustain water operations

Companies are better equipped to face the future than they have been at any time in the past decade.

-While carefully building capabilities for the long-term future around the energy transition and the circular economy—and demonstrating these to the investor community and other stakeholders—financial discipline nd prudent investment strategies should help stabilize performance and reassure financial markets in the near term.

To download the full report, click here