As 2019 draws to a close, Anna Belova – Senior Oil & Gas Analyst at data and analytics company GlobalData – explores the key trends set to shape the industry in 2020, ranging from a stronger focus on gas developments to a push for shorter-cycle investments.

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Push for shorter-cycle investments

 

“Oil & gas operators globally will continue to push for faster returns with shorter cycle investments, as the industry moves away from giant developments. Even with a large reserve base, smaller and phased developments are more likely in the future as compared to the ‘maximising peak capacity at all costs’ projects of the past,” anticipates Ms Belova.

 

“Projects now go from final investment decision (FID) to first oil/gas in under 3-4 years, even for larger integrated developments with midstream components,” she continued. “Globally, this trend was observed with Zohr in Egypt recently and is expected for Liza in Guyana. Both are being developed with a phased approach to building up capacity.”

 

Shift to natural gas 

 

“Demand for natural gas will accelerate in 2020, as it will increasingly be used to replace coal for power generation,” Ms Belova predicted.

 

“Investments in liquefied natural gas (LNG) will continue to occur across different geographies, but the question will remain on how US LNG exports will impact the international trade via volume and price. Sustained excessive supply of natural gas combined with midstream constraints in the US has been depressing the gas price at the country’s main hubs, thus making the US LNG exports potentially very competitive on the global markets.”

 

Expectation of peak demand for oil

 

Rise of electric vehicles (EVs) and shift to gas-powered electricity will put downward pressure on global oil demand in 2020, according to GlobalData’s Senior Oil & Gas Analyst. 

 

“With uncertain long-term demand, oil & gas operators will shy away from high-cost oil reserves. Producers overly focused on high-risk, capital-intensive projects and without diversified portfolios might find it difficult to survive in the reduced demand environment.   

 

Adoption of new technologies

 

Oil & gas can be written off as a mature industry, yet technological innovations continue to disrupt the industry, said Ms Belova. “Advancements in drilling and fracturing methods has allowed for production of hydrocarbons from previously untapped sources, such as ultra-deepwater locations or low-permeability shale formations. Shale oil production in the US has ultimately changed the global oil & gas geopolitical landscape,” she pointed out. 

 

“New technologies, ranging from AI-enabled drilling to remotely-controlled production facilities will allow for reduction in production costs, while driving capital and operational efficiencies,” she concluded.