Oil and Gas Industry Outlook: 2023 and Beyond

Throughout 2021 and 2022, the oil and gas industry rebounded strongly, with prices reaching levels last recorded six years ago. We can attribute this to a solid economic performance in major consuming countries and the containment of COVID-19 in leading markets. Although the industry's recovery is more robust than expected, there's still considerable uncertainty regarding future growth. This blog provides a comprehensive look at the trends that could shape the oil and gas industry in 2023 and beyond.

The Future of the Oil and Gas Industry in 2023 and Beyond

Amid a backdrop of increasing commodity prices, oil and gas industry players are optimistic the industry will extend its 2021 streak of short-term shareholder returns well beyond 2023. They also think companies need to plan for the transition to cleaner energy. The following are some of the oil and gas industry trends in 2023 and beyond.

Creating Value in a Low-Carbon Future

Investor feelings about the future of the oil and gas industry are decidedly mixed, owing to increased attention on environmental sustainability as the world finally turns its full guns on global warming. While many investors expect peak oil demand to occur in 2030, only 30% believe oil and gas stocks will increase in the next decade. This negative outlook is due to sustained pressure from clients to diversify their fossil fuel investments.

Today, investors are seeking clarity about emissions reduction in the industry. This pressure on the industry is expected to grow in 2023 and beyond, with more investors factoring in climate risk when valuing oil and gas companies. To address these demands, oil and gas companies are considering taking the following steps:

• Investing in clean energy to improve their long-term value proportions 
• Leveraging smart technologies to set and meet emissions reduction targets

Increase in Mergers and Acquisitions

As mentioned earlier, oil prices have been on an upward trend since the start of 2021, thanks to capped supply from the Organization of the Petroleum Exporting Countries, or OPEC, and recovering demand. However, upstream mergers and acquisitions (M&A), which typically follow oil prices, have been in a lull since. Experts largely attribute this to the increasing carbon profile of sellers and their assets, which naturally pose enhanced risks to oil and gas company valuations.

With more companies pursuing net zero goals, the industry will likely experience an increase in M&A transactions in the future. This implies that going forward; M&A activities need to support environmental, social, and governance (ESG) goals to be financially attractive to buyers.

Increase Adoption of Digitization to Enable a New Energy Era

As the world focuses on reversing global warming and climate change, stakeholders, including governments, investors, and environmental bodies, have handed a broad decarbonization mandate to oil and gas companies. Businesses have an opportunity to lead the decarbonization efforts by revolutionizing their traditional oilfield service (OFS) business model. In this regard, digitization will be integral in helping the sector remain cleaner and greener.

A transformed future OFS strategy leverages digitization tools like those offered by Aegex Technologies, to detect, monitor, and measure carbon emissions in their operations. This means they are taking pre-emptive action to reduce fugitive emissions from reaching the atmosphere.

Increased Decarbonization Strategies to Attract and Retain a Workforce

In 2020, oil and gas companies executed unprecedented layoffs because of the impact of COVID-19. Although prices have since doubled, the industry is struggling to attract and retain qualified talent. With heightened awareness of the role the oil and gas industry plays in increased global warming and climate change, higher pay alone isn't sufficient to differentiate themselves from the competition and attract talented candidates. A solid commitment to decarbonization efforts is emerging as the best recruitment pitch to attract and retain the workforce in 2023 and beyond.

What Could Impact the Growth of the Oil and Gas Industry in 2023?

The following are some of the factors that could negatively impact the growth of the oil and gas industry in 2023:

• Market uncertainty: Fears of a recession and a negative macroeconomic outlook have dampened the market sentiment for oil and gas commodities in 2023 and beyond. This has prompted the International Energy Agency to trim its global oil demand forecast for 2022 and 2023. The demand for oil is now expected to increase by 2.1 million barrels per day (BPD) compared to the previous forecast of 2.2 million BPD.

• High fuel prices: High fuel prices have started to impact oil consumption in the Organization for Economic Co-operation and Development. In 2022, the record high gasoline and diesel prices in Europe, the United States, and elsewhere cooled global oil demand by around 1 million BPD, or roughly 1% of global demand. Consumers can expect fuel prices at the pump to remain high into 2023 due to disruption to Russian oil supplies. In a recent survey, approximately 70% of respondents expect oil prices to remain above $60 per barrel through 2024.

• Geopolitics: People expect the war in Ukraine to continue impacting the demand and supply of oil and gas products in 2023 and beyond. Specifically, western sanctions on Russian oil following its invasion of Ukraine in early 2022 triggered lower Russian crude production and refinery oil. It also severely disrupted the global oil supply, ultimately leading to surging prices in the backdrop of increased demand and low supply.

Aegex Provides Digital Tools to Tackle Carbon Emissions

Recently, oil and gas stakeholders have been exerting increased pressure on oil companies to reduce their carbon footprint and reverse climate change. How the oil and gas companies address these demands will largely determine their future growth or lack thereof. Experts reveal reducing fugitive emissions can help achieve a 1.5 GtCO2e in annual abatement by 2050.

Oil and gas companies are now turning to digitization tools that incorporate innovative technologies, such as sensors, IoT, AI, machine learning, and data analytics to improve fugitive leak detection in their operations and boost predictive maintenance efforts in their supply chain lines. Aegex Technologies provides a range of smart tools equipped with the latest tech to help oil and gas companies tackle carbon emissions and reverse global warming. Contact us today to learn more about our digitization tools and how they can help your business meet ESG criteria.