What should industry expect to happen this year relating to oil and gas? That is a million-dollar question if ever there was one. It’s also a question that analysts and think tanks alike ponder about this time every year.
OGJ Senior Editor-Economics Conglin Xu and Statistics Editor Laura Bell do their best at fortune-telling industry’s future year in this issue’s Forecast & Review special report (p. 18).
In its latest “Commentary” series, published last month, analysts with the Center for Strategic & International Studies proposed their forecasts.
‘Buckle up’
Regarding the US federal policy front, with Democrats taking over control of the House of Representatives, the newly elected members of Congress should shake things up, said Sarah Ladislaw, senior vice-president, director, and senior fellow, Energy & National Security Program (ENSP).
“Buckle up,” she advises.
“If anything, we can be sure that 2019 will be eventful. Contrary to expectations going into the midterm elections, these new members have already pushed to make climate change a headline issue for House Democrats by advocating for the resurrection of a select committee to address climate change under the auspices of a ‘Green New Deal,’” she said.
“To be sure, this Green New Deal has very few established or prescriptive policies underpinning it and even fewer legislative pathways or strategy,” she added. “Its brilliance, however, is that it takes the most politically urgent issue of our time—inequality and opportunity for advancement—and creates a climate change and clean energy-oriented platform to address it. That is bona fide political strategy.”
Ladislaw said, “At this point, we know little beyond what the ascendance of the issue has brought thus far—namely, a shift in the idea that all legislative activity in the House will be about oversight of Trump administration actions to one where Democrats will also be looking for ways to make a down payment toward a bigger policy agenda under a Green New Deal.”
Interestingly, she said, “The trouble is that visions and platforms are great for catalyzing speeches and hearings, but policy design, passing legislation, and implementation are hard. Forward motion on any legislative agenda, no matter how visionary the platform, could be slowed down by other ‘must-pass’ congressional business, the expectation for even more disarray in the relationship between the White House and Congress as the Mueller investigation wraps up, and the increasing role of congressional action in addressing pressing foreign and trade-related policy issues where they think the administration is not doing enough.”
Making history
Andrew Stanley, ENSP associate fellow, said, “In 2018, US oil production will realize its largest annual gain in the industry’s over 150-year history.”
He said, “The upward revision of US oil production data, which has continued to far outpace the forecasts, has been a recurring theme in 2018. According to the US Energy Information Administration, the US is now pumping 11.6 million b/d of crude oil, roughly 2 million b/d beyond what it was producing just this time last year.”
He said last month that assuming US production held steady in December, year-on-year production growth should reach 1.5 million b/d (or 2.1 million b/d including natural gas liquids)—an all-time high. “This astonishing growth has accounted for 90% of the net increase in global production and more than 140% of the increase in demand,” he added.
“These US supply increases have played an important role in helping to form the current oil market imbalance, recreating a similar dilemma that the Organization of Petroleum Exporting Countries faced in the wake of the 2014 price crash, whereby any intervention to reduce supply was seen as an enabler of greater levels of US output,” Stanley said.
LNG growth
After many uneventful years, investment in LNG export projects picked up in 2018, a trend that will likely continue in 2019, said Nikos Tsafos, ENSP senior fellow.
“The rebound was modest, to be sure; but we are now entering that rare moment when there is a perfect alignment between market needs and project progress,” Tsafos said, adding, “The coming year will reveal how competitive the LNG supply has become.”
