Oil and Gas Industry 2018 Preview

Oil and Gas Industry 2018 Preview

In 2017, the United States held on to its position of being a notable energy exporter in the global oil & gas landscape, thereby augmenting the country’s intent to achieve an energy-independent future, in addition to supporting free trade policies. The year 2017 witnessed changes in political scenario, sluggish oil prices, high stocks, and various natural disasters. With President Donald Trump at the helm of affairs in the United States, and his intention to have a cordial relationship with Russia, the country is expected to continue its dominance in the oil market. Last year, the Organization of Petroleum Exporting Countries (OPEC) extended its cuts and strived to adhere to its targets, while the US producers in the oil market increased their production and kept costs down.

To learn what shaped the early clash of OPEC and US, click here

Shale Reserves and the Role of the United States

John England, US and Americas Oil and Gas leader from Deloitte LLP, opines that in 2018, US shale cost reductions could turn out stickier than originally anticipated. This can be attributed to the sustainability associated with the remarkable cost reductions achieved by conventional producers, and break-even costs of major shale players in the United States being around 30-50% lesser than the values of early 2015. Considering the price scenario of 2017, the prediction that costs in the oil market would stay down in the years to come seems sensible, if the ecosystem comprises of a healthy balance of producers, manufacturers, and service providers.

Price Predictions for 2018

Reports suggest that in 2018, oil price WTI could increase from USD 56 per barrel in 2017, to USD 63 per barrel in 2018. On the other hand, the natural gas price is expected to reach USD 3.40 per MMBTU in 2018 from USD 3.30 per MMBTU, with natural gas being widely hailed as the fuel of the future. It is expected that natural gas and LNG still hold the potential for long-term growth. However, investment on LNG could become a challenging affair, as the older trend of long-term contracts is being replaced by the latest trend of short-term contracts, as prices remain more volatile than ever.

Click here to learn how technology can shape the industry in 2018

Significance of the Latest Technologies in the Oil & Gas Industry

With the decline of oil prices, the oil & gas industry has been pressurized into cutting down on its production and operational costs. Every aspect of the entire value chain has faced the heat of cost reduction, with a decrease in CapEx. In this backdrop, firms are employing various state-of-the-art technologies, such as Big Data, Internet of Things, Cloud, etc., to successfully reduce costs and enable faster decision making.

By utilizing these sophisticated technologies, firms are paving the way for the creation of a competent digital oil field, which is termed as the next big thing in the industry. On a constant pursuit of operational excellence, firms are utilizing mobility and analytics solutions to turn production data into a goldmine of valuable information, so that personnel can respond to issues from anywhere in the world, at ease. Organizations have been deploying technologies, such as oilfield automation, drilling automation, laser drilling, etc., to remain competitive and maximize profitability and productivity.

It is to be noted that crude oil production is relatively cheaper in the Middle East, whereas shale oil production zones are mainly concentrated around the United States. Therefore, changes in political scenarios, geopolitical tension, and trade policies between countries could continue to cast their influence through 2018. In addition, collaborations between industry giants are also expected to be a key factor that promotes productivity and sustainability. For instance, the merger of Royal Dutch Shell PLC with BG Group in a deal worth USD 52 billion, accounted for almost half of the combined entity’s upstream capital expenditure. In a fluctuating sector the oil market, it is almost impossible to make an accurate prediction of the production quantities and prices of the future. While proficient industry analysts, including Matt Simmons and Boone Pickens themselves, have made several off-the-mark predictions, it can be safely said that the general trend is clear – Technology is the only way forward!