BAKU, Azerbaijan, May 21
By Leman Zeynalova – Trend:
Even as oil reaches peak demand, demand is expected to slowly plateau over the coming decades, and is projected to remain above 87 MMbbl/d till the end of this decade, Trend reports with reference to Deloitte.
Just to replace the annual consumption and offset natural field declines, the industry would need to invest more than $525 billion annually in oil and gas projects, the company believes.
“Even in a decade marred by disruption and acute price pressure, oil generated significant value for many low-cost oil operators and their stakeholders. In our analysis, for example, about 66 percent of oil-heavy portfolios sampled delivered above-average returns. In fact, a few oil companies have delivered average returns on capital of over 20 percent over the last 5 years, higher than many companies in nonservice industries including utilities and capital goods. For example, Lundin Energy AB has realized value from its oil-heavy portfolio and consistently delivered an all-round performance over the last 4-6 years.”
“Oil and electricity—the two ends of the portfolio spectrum—are both commodities but with different margin and risk-return profiles. The industry has— and will likely continue to have—companies operating on both ends of the spectrum. Traditional upstream companies could choose to remain oil and gas specialists and be the leanest E&Ps, operating with a pervasive focus on cost and performance. Such oil specialists may find utility type margins and fragmented competition in the greener business unattractive, and a few of these businesses may not even play to their core strengths. At the same time, pioneers of new energy are expected to increasingly build new capabilities and move away from a commodity mindset,” said Deloitte.
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