Global energy transition casts a shadow over oil and gas prospects

According to a report from the ICIS-MRC website in Moscow on June 1, according to a statement by Reuters, citing consulting firm Wood Mackenzie, the global energy transition is bringing about US$14 trillion worth of oil and gas assets.

It stated in a report that as the world recovers from the new crown epidemic, daily demand for oil and gas will exceed the record of 160 million barrels of oil equivalent set in 2019.

Wood Mackenzie said that after six years of falling oil prices, the upstream industry is healthier and leaner than ever.

Fraser McKay, vice president of Wood Mackenzie, said that although the industry has enjoyed sustained growth in demand for nearly a century, it now finds itself having to supply oil and gas to a world where future demand and prices are highly uncertain.

According to Wood Mackenzie, the gradual transformation of energy will keep oil demand above 90 million barrels per day by 2050, encourage investment in higher-cost supplies, and support oil prices at slightly higher than US$80 per barrel by 2030.

However, if the world decides to keep global warming within 2 degrees Celsius by 2050, oil demand will peak before 2025 and drop to 35 million barrels per day by 2050, which is 70% lower than the peak level.

Wood Mackenzie stated that in both cases, with the support of Asian coal substitution policies, natural gas demand and prices will remain elastic, adding that this will attract more investment in natural gas production instead of oil.

In the first case, the price of LNG will remain at $8-9 per million British thermal units in 2040 and beyond, while in the second case, the price of LNG will remain at $7-8 per million British thermal units.

　　Hao Fen translated from ICIS-MRC

　　The original text is as follows:

　　Global energy transition clouds oil-gas outlook despite post-pandemic boost this year

　　Global energy transition is creating uncertainty for an estimated USD14 trillion worth of oil and gas assets that have long depended on an indefinite rise in demand to offset risks despite a pandemic boost this year, reported Reuters with reference to consultancy Wood Mackenzie's statement.

　　As the world recovers from the COVID-19 pandemic, oil and gas demand is set to go beyond the record 160 million barrels of oil equivalent per day reached in 2019, it said in a report.

　　"After six years of weaker prices, upstream is fitter and leaner than ever," Woodmac said, adding that the sector will generate as much cash flow this year at USD60 per barrel as it did at USD100 prior to the 2014 price crash.

　　While the industry has enjoyed a century of near continuous demand growth, it now finds itself having to supply oil and gas to a world in which future demand and price are highly uncertain, Wood Mackenzie vice president Fraser McKay said.

　　A gradual energy transition would see oil demand staying above 90 million barrels per day to 2050, encouraging investment in costlier supplies and supporting prices at just above USD80 a barrel by 2030, Woodmac said.

　　However, if the world decides to limit global warming to 2 C by 2050, oil demand would peak before 2025 and fall towards 35 million bpd by 2050, 70% below peak levels.

　　In both scenarios, gas demand and prices would remain resilient, supported by coal displacement in Asia, Woodmac said, adding this would draw more investments toward gas production rather than oil.

　　The first scenario would keep liquefied natural gas (LNG) prices at USD8 to USD9 per million British thermal units (mmBtu) through 2040 and beyond, while in the second, LNG prices remain robust at USD7 to USD8 per mmBtu, before starting to fall post 2040.