Oil price fluctuations unlikely to impact industry trajectory

06/07/2015 08:02 AST

The cyclicality of the oil and gas industry is unlikely to impact the long term trajectory of the sector. However the current fluctuations may speed up some of the trends that were already unfolding according to Deloitte’s latest Oil and Gas Reality Check 2015 report.

The report outlines six of the major issues currently impacting the oil and gas industry. These issues include an anticipated shift in supply-demand fundamentals, the emergence of new trading patterns, consideration of OPEC’s role in the market, falling LNG prices, the long-term costs of complex projects and evolving dynamics between integrated oil companies (IOCs) and national oil companies (NOCs).

“The oil and gas industry has been built on long-term investments and has successfully emerged from cyclical downturns in the past. As these trends play out, companies across the board need to adapt and remain agile to emerge a leaner, fitter business. At the same time, it’s worth remembering that weaker price signals spur innovation and market consolidation across the value chain. With that in mind, it’s not unreasonable to expect that lagging oil prices will spur greater R&D investment in innovation, M&A and scenario-based energy strategy development,” said Salam Awawdeh, partner and Energy & Resources leader for Deloitte Middle East.

“Global markets are also shifting their supply-demand fundamentals. For instance, while the Middle East can meet its current needs, demand for both oil and gas in the region is growing. A number of emerging, and re-emerging major suppliers can also potentially change energy market dynamics. Output from southern Iraq and Iraqi Kurdistan could ramp up, for example, despite the security issues that currently plague the region,” he added.

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