BAKU, Azerbaijan, Oct.13
By Leman Zeynalova – Trend:
Lower prices and downward revisions to demand, resulting from the pandemic, have cut around one-quarter off the value of future oil and gas production, Trend reports with reference to the World Energy Outlook 2020 of the International Energy Agency (IEA).
“Many oil and gas producers, notably those in the Middle East and Africa such as Iraq and Nigeria, are facing acute fiscal pressures as a result of high reliance on hydrocarbon revenues. Now, more than ever, fundamental efforts to diversify and reform the economies of some major oil and gas exporters look unavoidable.
“The US shale industry has met nearly 60 percent of the increase in global oil and gas demand over the last ten years, but this rise was fuelled by easy credit that has now dried up. So far in 2020, leading oil and gas companies have reduced the reported worth of their assets by more than $50 billion, a palpable expression of a shift in perceptions about the future. Investment in oil and gas supply has fallen by one-third compared with 2019, and the extent and timing of any pick-up in spending is unclear. So too is the ability of the industry to meet it in a timely way: this could presage new price cycles and risks to energy security.
“Low-cost resources, low emissions and diversification are becoming the strategic watchwords for many producer economies and for oil and gas companies. Declines in production from existing fields create a need for new upstream projects, even in rapid energy transitions. However, investors are looking with increased scepticism at oil and gas projects due to concerns about financial performance and the compatibility of company strategies with environmental goals. Some of the financial concerns might ease if prices pick up and projects start to offer better returns, but questions about the industry’s contribution to reducing emissions are not going to go away,” reads the report.
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