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Oil and Gas: The Future is Gas

Oil & Gas	1038 VIEWS
Oil & Gas
1038 VIEWS

PROSHARE
PROSHARE

Saturday, January 16, 2021 /06:00 AM / By Proshare Research/ Header Image Credit: EcoGraphics

Oil? Eye on The Sparrow

With the United Kingdom (UK) announcing that it would ban fossil fuel vehicles in 2030 and with other nations making similar pronouncements, the future of diesel and premium motor spirit oil appears dim. This being said, gas may begin to pick up the slack as more cars and buses use compressed natural gas (CNG) engines and long-lasting rechargeable batteries.

As white oil products see demand fall and prices drop, O&G companies will increasingly see a rise in demand for gas, hence shifting the dynamics of their businesses. Industry connectivity will be more gas-facing than oil-facing and the industry value chain will pivot away from oil as new gas-related technical skills become more in demand and logistic channels alter to accommodate the new requirements of distribution and delivery.

The new energy order will be one that is gas-dominated with a market-determined pricing structure outside established market cartels such as the organization of petroleum exporting countries (OPEC) and its recent allies OPEC-plus. The new gas market would likely be more volatile than the petroleum market at the beginning as demand and supply factors work themselves out to establish market balance, however, once the kinks in the price discovery mechanism work themselves out countries like Nigeria should be able to create value streams that improve their national treasuries. The gas market will gradually become king and the fiscal authorities in major gas producing nations would likely see revenues rise noticeably over the next decade (see illustration 5 below)

Illustration 5 : How Africa's O&G Shaped up in 2020

Scaling up Domestic Gas Consumption

Oil and gas companies will have to transform speedily, indeed the successful corporations will be in a position to ensure sustainability and profitability while the unsuccessful ones become candidates for consolidation. Serious businesses are not in the trade of providing bandaid for challenged competitors, they simply grow and sweep up their weaker rivals along the way. This is not a matter of corporate wickedness, but just a little matter of how properly-oiled markets work.

With countries announcing targets between 2030 and 2040 for carbon neutrality, time is running out on petroleum business. The emergence of electronic vehicles (EVs) and hybrid gas-powered automobiles underlines a new energy era (see illustration 6 below).

Illustration 6: Changing the Energy Mix, A Migration to the Probable (2018-2040)