2016 oil and gas industry survey
Optimism emerges in the aftermath of a long downturn
The latest outlook from oil and gas professionals reflects a renewed confidence in the future of oil and gas. However, this does not mean there are not challenges ahead. Explore the findings from Deloitte’s 2016 oil and gas industry survey, including the areas of expected opportunities and challenges along the oil and gas value chain.
Current and future outlook for the oil and gas industry
The oil and gas industry’s success is always centered on geology and engineering. Over the last two years, however, above-ground risks have outweighed below-ground risks, primarily affecting oil prices and production.
The oil price collapse began in June 2014. It escalated by the end of that year when OPEC, led by Saudi Arabia, elected to reverse its historical swing producer policy, and it attempted to recapture market share by maintaining production levels after world crude oil demand growth faltered. Oil inventories rose dramatically and non-OPEC production declines in some countries did little to curb excess supply.
Natural gas production had been growing for several years before unconventional oil supply growth took off in the United States. This occurred as new technology unlocked heretofore uneconomical and difficult-to-access shale gas resources.
At the same time, LNG developments around the world unlocked stranded gas in places like Australia, Papua New Guinea, and Qatar, to develop more natural gas than US and global markets could readily absorb in the near term. With both oil and gas in their current state of oversupply, rising US and global demand will be needed to support a price recovery over the next years. Sustained global economic growth will be key.