How will peak oil demand affect the upstream industry?
Peak oil demand could reduce upstream interest and investment in exploration
1 minute read
With demand for oil in developed countries slated to begin a permanent decline by 2020, we expect to see the upstream industry become even smaller and more efficient. Operators have already begun to move away from high-cost, high-risk frontier plays, consolidating their positions and focusing on better-understood basins and near-field opportunities. Higher oil prices will be needed to ensure new development as tight oil growth runs its course, or else operators will need to rely on further cost deflation, project optimization and changing fiscal terms to keep projects competitive.
As part of our coverage on peak demand, Ann-Louise Hittle, Vice President – Research, Macro Oils, and Douglas Thyne, Senior Research Manager – Global Oil Supply, sat down and shared their thoughts on how peak oil demand will affect OPEC and upstream as a whole.
OPEC members aren't likely to see their revenues or market share significantly affected by slowing demand growth until 2035 and OPEC will need to increase its production capacity to meet demand. Those OPEC producers with rising production can expect higher oil revenues over the next decade as their market share rises - the result of increasing prices and a tightening supply and demand balance, as non-OPEC supply plateaus by 2026. However, in a challenge for OPEC producers, at the same time, they cannot ignore the prospect of peak oil demand. Where possible, some OPEC nations are preparing for a future with less dependence on oil demand.
You can read more about our outlook for OPEC and non-OPEC members in our recent report.
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Hear more from Ann-Louise on Twitter @WMALHittle or purchase our Long-Term Macro-Oils Outlook:
Macro oils long-term outlook H1 2017: US tight oil vs conventional, OPEC, peak oil demand
In our full peak oil demand series, we look more closely at the impacts on the supply chain, coal, metals, chemicals, refining, gas, power and renewables industries and how companies will adapt. You can also read more about the impact electric vehicles will have on oil demand.