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Released September 16, 2021 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Last year, as the COVID-19 pandemic took hold, about $200 billion worth of Oil & Gas projects were deferred into future years. This year has brought a resurgence in these projects, with several positive final investment decisions made for the near future. However, investor sentiment is changing, and environmental, social and governance (ESG) policies are affecting how many oil and gas majors are playing the game. In Industrial Info's recent webinar on the global oil and gas project outlook, Gordon Gorrie, Industrial Info's vice president of research for Oil & Gas, and Shane Mullins, vice president of Product Development, discussed the trends and drivers shaping near-term project activity in this sector.
Natural gas is playing a large role in the energy transition, as many countries transition away from coal for power generation and developing countries transition from wood to gas for activities, such as cooking. Natural gas serves as the primary "bridging fuel" used for more environmentally friendly baseload power as countries work on building out their renewables footprint and battery energy storage technologies develop.
A majority of spending in the coming years will be focused on natural gas and liquefied natural gas (LNG). Industrial Info is tracking more than 400 active LNG regasification projects across the world. Regasification projects currently under construction will add 147 million tons per year of import capability when completed. Mullins noted that LNG spot prices are high right now, resulting in several buyers coming back to the table to negotiate long-term sales and purchase agreements with producers, allowing more LNG production projects to move forward more quickly. Global natural gas demand is expected to grow through 2035, after which there will be a levelling off.
A majority of spending in the Oceania region is focused on natural gas-related projects. Australian companies are looking closely at carbon-neutral LNG production, with Santos Limited (Adelaide, Australia) and Woodside Petroleum Limited (Perth, Australia) establishing carbon capture for LNG projects.
South Asia
A majority of spending in the South Asia region comes from India, where Industrial Info expects to see significant project activity related to natural gas. The country has set an initiative to have gas account for 20% of its energy mix by 2030. Industrial Info is tracking four LNG regasification terminals under construction in the country that are expected to come online throughout 2022. In addition, the natural gas initiative has spurred pipeline development, with 1,800 kilometers of pipelines being proposed, the majority of which are slated to kick off construction in 2022.
Europe & Russia
Industrial Info is tracking about $152 billion in Oil & Gas projects planned for a 2022-23 kickoff in Europe, which is a leader in energy transition trends, including carbon capture, reducing methane emissions, and the use of green and blue hydrogen.
In the U.K., several North Sea decommissioning projects were deferred last year, but companies are beginning to revisit these plans. U.K. offshore operators are taking a leading role in decarbonization. Projects will include the installation of renewable energy sources.
In addition, a decline in gas production in Europe will lead to more LNG import and regasification terminals being built. Poland, in particular, will transition away from Russian gas when its contract expires next year and is expected to build more regasification capacity. Construction on the Nord Stream 2 natural gas pipeline from Russia to Germany recently was completed, and it is expected to begin delivering gas by the end of the year.
U.S. & Canada
The U.S. and Canada are facing a new reality in which capital discipline is not enough to please investors, who are looking at ESG priorities. Investors want projects with clear targets for helping companies reduce greenhouse gas emissions. Industrial Info is tracking approximately $308 billion in Oil & Gas projects in the U.S. and Canada planned to kick off in 2022-23.
After massive buildouts in pipeline and natural gas fractionation infrastructure in recent years, there has been some slowdown in this activity in the U.S., although Mullins said, "This year is still actually pretty good for new pipeline construction. There's $12 billion in construction activity still moving forward." Spending for pipeline and processing infrastructure in Canada is ramping up as producers in the Montney region strive to meet the needs of the Royal Dutch Shell (NYSE:RDS-A) (The Hague, Netherlands)-led LNG Canada project in Kitimat, British Columbia. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for the project report.
Mullins said, "The reality that we face is that the world and the U.S. are going to need to keep responsibly producing oil and gas, as you simply cannot electrify everything to meet your emissions goals without causing massive inflation. Anytime you slow down Oil & Gas capex, you're going to start to see commodity prices rise, and that increases the price of everything. Oil demand has not peaked and will not peak for many years. Natural gas production is going to continue to displace coal globally and LNG production growth is going to continue displace wood for cooking fuel, so there's a lot of life left in this industry."
Click here to listen to webinar for a deeper dive into Gorrie and Mullins' discussion, which also included activity in regions such as Southeast Asia, the Middle East, Africa and Latin America.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
Natural gas is playing a large role in the energy transition, as many countries transition away from coal for power generation and developing countries transition from wood to gas for activities, such as cooking. Natural gas serves as the primary "bridging fuel" used for more environmentally friendly baseload power as countries work on building out their renewables footprint and battery energy storage technologies develop.
A majority of spending in the coming years will be focused on natural gas and liquefied natural gas (LNG). Industrial Info is tracking more than 400 active LNG regasification projects across the world. Regasification projects currently under construction will add 147 million tons per year of import capability when completed. Mullins noted that LNG spot prices are high right now, resulting in several buyers coming back to the table to negotiate long-term sales and purchase agreements with producers, allowing more LNG production projects to move forward more quickly. Global natural gas demand is expected to grow through 2035, after which there will be a levelling off.
A majority of spending in the Oceania region is focused on natural gas-related projects. Australian companies are looking closely at carbon-neutral LNG production, with Santos Limited (Adelaide, Australia) and Woodside Petroleum Limited (Perth, Australia) establishing carbon capture for LNG projects.
South Asia
A majority of spending in the South Asia region comes from India, where Industrial Info expects to see significant project activity related to natural gas. The country has set an initiative to have gas account for 20% of its energy mix by 2030. Industrial Info is tracking four LNG regasification terminals under construction in the country that are expected to come online throughout 2022. In addition, the natural gas initiative has spurred pipeline development, with 1,800 kilometers of pipelines being proposed, the majority of which are slated to kick off construction in 2022.
Europe & Russia
Industrial Info is tracking about $152 billion in Oil & Gas projects planned for a 2022-23 kickoff in Europe, which is a leader in energy transition trends, including carbon capture, reducing methane emissions, and the use of green and blue hydrogen.
In the U.K., several North Sea decommissioning projects were deferred last year, but companies are beginning to revisit these plans. U.K. offshore operators are taking a leading role in decarbonization. Projects will include the installation of renewable energy sources.
In addition, a decline in gas production in Europe will lead to more LNG import and regasification terminals being built. Poland, in particular, will transition away from Russian gas when its contract expires next year and is expected to build more regasification capacity. Construction on the Nord Stream 2 natural gas pipeline from Russia to Germany recently was completed, and it is expected to begin delivering gas by the end of the year.
U.S. & Canada
The U.S. and Canada are facing a new reality in which capital discipline is not enough to please investors, who are looking at ESG priorities. Investors want projects with clear targets for helping companies reduce greenhouse gas emissions. Industrial Info is tracking approximately $308 billion in Oil & Gas projects in the U.S. and Canada planned to kick off in 2022-23.
After massive buildouts in pipeline and natural gas fractionation infrastructure in recent years, there has been some slowdown in this activity in the U.S., although Mullins said, "This year is still actually pretty good for new pipeline construction. There's $12 billion in construction activity still moving forward." Spending for pipeline and processing infrastructure in Canada is ramping up as producers in the Montney region strive to meet the needs of the Royal Dutch Shell (NYSE:RDS-A) (The Hague, Netherlands)-led LNG Canada project in Kitimat, British Columbia. Subscribers to Industrial Info's Global Market Intelligence (GMI) Production Project Database can click here for the project report.
Mullins said, "The reality that we face is that the world and the U.S. are going to need to keep responsibly producing oil and gas, as you simply cannot electrify everything to meet your emissions goals without causing massive inflation. Anytime you slow down Oil & Gas capex, you're going to start to see commodity prices rise, and that increases the price of everything. Oil demand has not peaked and will not peak for many years. Natural gas production is going to continue to displace coal globally and LNG production growth is going to continue displace wood for cooking fuel, so there's a lot of life left in this industry."
Click here to listen to webinar for a deeper dive into Gorrie and Mullins' discussion, which also included activity in regions such as Southeast Asia, the Middle East, Africa and Latin America.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
