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Oil & gas industry is not at risk of being starved of capital

Oil&Gas Materials 27 November 2020 14:07 (UTC +04:00)
Oil & gas industry is not at risk of being starved of capital

BAKU, Azerbaijan, Nov.27

By Leman Zeynalova – Trend:

The oil and gas industry is not at risk of being starved of capital, Trend reports with reference to Wood Mackenzie.

“Capital discipline has been the order of the day since the last big oil price crash. And as environmental, social and governance (ESG) issues become mainstream, fund managers and banks are under increasing pressure to justify owning oil and gas shares. Many of the Majors are focused on setting long-term goals for zero emissions and are planning ambitious diversification to align with the energy transition. But in 20 years, oil and gas could still make up as much as 60% of the global energy mix.

Ultimately, the industry is not at risk of being starved of capital – the world will still need oil and gas. But Big Oil will need to think deeply about how to stay investible. Money will flow more easily to those players that have a clear and transparent ESG strategy as sustainability increasingly shapes strategic decisions,” the company said in its analysis.

Wood Mackenzie believes that upstream spending will also need to shift to align with changing investment priorities. “Portfolio resilience will be key. Many capital intensive, long life upstream projects yielded low double digit, or even single digit, returns at US$50 a barrel, even before decarbonisation was in the spotlight. These types of projects are at risk as investors chase lower volatility returns and maximum value. But there are plenty of opportunities available for companies to get it right. We assess the main options for portfolio renewal.”

The company recalled that the first half of 2020 was the slowest for deal activity since the company’s records began at the turn of the century.

“But the market is rapidly changing and upstream is now awash with M&A opportunities. Currently, we’re tracking 200 potential disposals in our deal pipeline, worth at least US$130 billion, and there’s a wide range of assets across resource type and geography.”

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Follow the author on Twitter: @Lyaman_Zeyn

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