Ten major changes in the energy industry in 2021

Wood Mackenzie, a global leader focusing on business information in the field of natural resources, recently made ten predictions for the energy industry in 2021, analyzing oil price trends and important changes that will occur in the energy industry.

One is that "strong growth in oil demand will push up oil prices.

With Pfizer-BioNTech's new crown vaccine starting to be launched in the United Kingdom and the United States in mid-December 2020, it is expected that the shutdown due to the new crown epidemic will begin to ease in the first quarter of next year.

China's oil demand this quarter has been higher than the level of the same period in 2019.

The second is "even if prices rise, the downturn in the upstream oil and gas industry will continue for one year.

In 2021, the level of investment in the upstream industry will remain unchanged at approximately US$300 billion.

The evaluation of projects will increasingly be based on environmental, social and corporate governance effects.

The third is "the diversification of low-carbon energy by oil and gas companies will accelerate.

　　European giants have established a zero-carbon growth target, which will be refined in 2021, and continue to use low-carbon technology investment to lay the foundation for entering a net-zero track.

　　The change of the US government, the upcoming 26th UN Climate Conference, and changes in stakeholder sentiment will force other international oil companies and national oil companies to follow suit.

　　The fourth is "more companies will set emission reduction targets.
"

　　A team of 30 managers who manage a $9 trillion fund has made a commitment to achieve a net-zero emission target for its investment portfolio by 2050.
It can be seen from this that with regard to climate change, the pressure from investors is increasing.
They also pledged to align the 2030 mid-term goal with the goal of limiting global warming to 1.
5°C.

　　At the beginning of next year, the EU and UK regulators will begin to push listed companies to adopt the recommendations of the Climate-Related Financial Information Disclosure Working Group to discuss their emissions and climate risks.
Under the dual pressure of investors and regulators, more companies will make emission reduction commitments, and more ambitious companies will set mid-term intermediate goals.

　　Fifth, "the U.
S.
tight oil industry will reach a huge deal.
"

　　All the requirements for the scale merger are already in place.
Companies with strong financial strength can take advantage of their capital cost advantages.
Making smart deals can reduce the requirement for maintenance capital.
The risk mitigation effect of diversified mergers is exactly what the tight oil business needs.
Therefore, a huge deal will be reached next year, which will have a great impact on the tight oil industry.

　　In the absence of significant fluctuations in the crude oil market, two large companies will merge.
Judging from some recent transaction documents, there may even be a merger of three major companies.
Although some people believe that the impact will affect the Permian Basin, and ultimately only five important operators will remain, but we believe that this is not the case.
It is believed that a well-known company (or three companies) will withdraw from the market in 2021.

　　Sixth, "The price of the solar purchase agreement will hit a new low, below US$13/MWh.
This time it will not happen in the Middle East.
"

　　The solar industry has become accustomed to the situation where PPA (power purchase agreement) prices plummet every few months.
Four of the five lowest award-winning PPA contracts are contracts in the Middle East, where solar energy is cheap and the conditions are the most favorable: low capital costs, offtake guarantees, supplier rights and sufficient sunlight.

　　Spain and Chile are the first two contenders to compete for the world's lowest solar PPA price ($13.
50/MWh) in the United Arab Emirates.
They held renewable energy auctions in January and May, respectively.
Both countries have complete wholesale markets, which may attract developers to actively bid.
It is expected that after the PPA is signed, wholesalers' revenue will be generated at the back end of the contract.

　　As asset owners become more and more savvy, abandoning all contract proceeds and accepting part or all of wholesaler exposure under the circumstance of declining solar energy costs and increasing asset life expectancy, this will become a global trend.

　　Seventh, "Global sales of electric vehicles will approach 4 million units, an increase of 74% compared to 2020.
"

　　Many countries have launched stimulus plans to offset the economic impact of the new crown epidemic, all of which include increasing support for electric vehicles.
The measures determined to be implemented this year may be effective in 2021.

　　China's high subsidy policy originally scheduled to expire this year will be extended to 2022.
Some EU countries have increased subsidies for electric vehicles and added some "carrots" to the "big stick" policy with stricter emission requirements.

　　The new US government has made a commitment to support the development of electric vehicles and is expected to abandon the federal government’s opposition to California’s stricter fuel economy and vehicle emission standards, thereby helping to increase sales.

　　All these indicate that although the sales of electric vehicles still account for only 5% of the total global car sales, they will achieve rapid growth in 2021.

　　Eighth, "more governments will begin to hold shares in the critical energy transition supply chain.
"

　　On January 20, when Joe Biden entered the White House, the governments of all the world's largest economies have set a goal of achieving net zero greenhouse gas emissions within 30 or 40 years.

　　The supply chain of low-carbon energy will be more strategic than ever.
Governments will take safe supply measures for certain resources (including lithium, nickel, and cobalt, which are sometimes referred to as "energy transition metals").
These include holding key asset equity, and for those who have the necessary resources so far but cannot invest.
The state provides financial guarantees for private sector investment.

　　Ninth is "China's Australian coal import ban will last for a whole year.
"

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