2020 Oil, Gas, and Chemical Industry Outlook

Walking the tightrope - vigilance required to keep moving forward in 2020

As we, once again, move from one year to the next, how do we assess the oil and gas and chemical sectors’ performance in 2019 and its prospects for 2020? As always, there are headwinds and tailwinds, risks and opportunities, uncertainties and foreseeable trends, but in this report we aim to take stock of the main factors to watch for in 2020 across the diverse oil, gas, and chemical industry. Over the past decade, we have seen the heights of bullish optimism and seemingly limitless investment during the years of the $100 per barrel world, from 2011 to mid-2014, and the lows of the price crash and extended oil downturn, from mid-2014 to 2017. Neither extreme seems in the cards for an imminent return as the industry has learned valuable lessons from both episodes, but uncertainties are clearly still a challenge to performance and investment.

As we evaluate the most prominent trends and issues for the oil and gas and chemical sectors in this outlook, executives in these businesses seem keenly aware of wider macroeconomic and business environmental risks, which seem to be gaining strength. Among these are:

• Weakening economic growth, not only in the United States but also in Europe and China;
• Ongoing, perhaps intensifying, trade tensions, which can create uncertainty, dampen growth, and lead to modifications in long-established supply chains; and
• The many political risks, of course, including the US election cycle, the outcome of the Brexit process in Europe, and tensions in the Middle East between multiple states and non-state actors with different objectives.

And, while walking the tightrope across these shifting sands in 2020, fundamental changes in the long-term business environment could become more salient. So, attention to the coming disruptive forces associated with this century’s energy transition and sustainability imperatives is increasingly crucial alongside day-to-day positioning.

2020: Balancing the short- and long-term needs

How can company executives remain vigilant to the many risks and uncertainties clouding the outlook for 2020 while standing ready to embrace new opportunities for profitable growth in an evolving market landscape, which might look quite different in the next decade and thereafter, as disruptive forces accelerate? We see signs that many of the lessons from oil and gas of the large swings in the price environment and from chemicals of market dislocations have been taken on board, and these industries, as a whole, are better equipped to face the future than they have been at any time in the past decade. While carefully building capabilities for the long-term future around the energy transition and the circular economy (and demonstrating these to the investor community and other stakeholders), financial discipline and prudent investment strategies should help stabilize performance and reassure financial markets in the near term.