Global markets & trade
Industry drivers Established industry norms have changedwith supply outstripping demand. The balance of power between net oil exporting and importing nations, and between oil producers themselves across different regions, is shifting. The effects are being felt globally. The central role of OPEC in determining supply volumes, with its consequent effect on prices, is under intense scrutiny, as industry players continue to look to OPEC to resolvemarket tensions. While its global dominance may bewaning, OPEC policy is the singlemost important geo-political factor affecting oil & gas businesses today – according to nearly three quarters (74%) of respondents to our survey. It far outstripped the next most pressing concern – the slowing of the Chinese economy – which was flagged up by half (50%) of those surveyed. The lifting of Iranian sanctions also features highly on the list of industry preoccupations (41%). Iran has ambitious production targets and is eager to attract foreign investment. For IOCs, the appeal of Iran’s reserves are obvious – but the fiscal terms for investment will also need to be attractive and E&P companies will be evaluating political and country risk carefully. 74% OPEC policy 50% Slowing of Chinese economy 41% Impact of sanctions (such as Russia, Iran 1 ) What will be the most significant geopolitical trends affecting your business in 2016?
Impact on business The variety of market trends that are expected to affect oil & gas businesses in 2016 is extremely wide. Of these, reduced profitability/viability of E&P activities emerges as the primary concern for almost two-thirds (64%) of respondents, followed by risks posed by lack of appetite for investment in new projects (59%). Four in ten (41%) expect to be affected by the failure or insolvency of existing oil & gas or service companies. What market trends do you expect to affect your business most in 2016?* 41% Failure/insolvency of existing companies
64%
Reduced profitability/ viability of E&P activities Cost of transportation and distribution of oil & gas Demand for storage of oil & gas Divergence into other forms of energy Consolidation of E&P and service companies
9% 8%
4%
21%
15%
Supply chain consolidation
10%
Increasing regulation and compliance requirements Reduction in subsidies or government concessions
4%
Lack of appetite for investment in new projects
60%
Policy changes stemming from COP 21 Lack of appetite for investment in existing projects
35%
4%
*Respondents were asked to select a maximum of three answers
1 The EU lifted all Iranian sanctions on 16 January 2016 (“Implementation Day”). This survey was conducted following this announcement in February 2016.
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