Energy experts say Houston’s oil and gas industry can expect more pressure from investors to make significant progress in tackling climate change this year, including encouragement to walk away fossil fuels and diversify their energy portfolios.
It comes as the industry rebounds from historic losses in the pandemic’s first year and continues to face continued challenges as the variants disrupt global travel and trade.
To learn more about the outlook for the oil and gas industry in 2022, Houston Public Media spoke with Mitch Fane, U.S. oil and gas leader at consultancy firm Ernst & Young.
This interview has been edited for length and clarity.
What do you see as the outlook for oil and gas demand by 2022?
What we have continued to see is that even with the new variant that has come out, demand continues to grow slowly as global economies are sort of pulling themselves out of it. The demand itself has continued to increase.
Along with the increase in demand, there has generally not been the same level of increase in drilling, so supply has not kept pace. This is one of the reasons we believe we will continue to see wholesale prices in the $ 60- $ 70 per barrel range of oil as the economies grow or at least for the next year.
What will you observe as 2022 approaches in terms of climate action for the oil and gas industry?
I think what you’ve seen is an opening to start exploring further this concept of energy convergence where you look at all forms of energy – and it’s very exciting. I think one of the questions that’s built in here, and it’s a really good question, is, “why should oil and gas have a seat at the table as we go down this route?” “
And it took me a little while to think about it and say, “A lot of these companies are some of the biggest companies in the world. They deal with very complex hydrocarbon engineering issues. They have access to capital and have enjoyed the support of various financial institutions for years.
So it’s a perfect vehicle to take their hydrocarbon intensive business and use it to help drive, to really tackle this complex issue of energy transition going forward.
What are the challenges the industry will face over the next year?
It is mentioned that we have to go through this energy transition, but the cost and volatility that we are going to experience is not always highlighted as we take this path. And so like what you’ve seen in Europe this year when it comes to how they have to supply a lot of their heating and energy needs, and how volatile it has become to have long-term access to electricity. natural gas via LNG and other shipments to really meet their energy demand needs is kind of a microcosm of what we can expect to see.
So, for example, we have already seen on the supply side of many upstream companies having access to capital challenges – which means that in order to continue with their drilling programs, they have to look for other ways of doing so. self-finance. All of these things will continue as we go through this energy transition.
While it’s great that we can do better and we do better, I think one of the hallmarks of that will be slightly higher energy costs and potentially a bit of volatility around those energy prices.
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