Posted on: 12. 30. 19
Oil and gas production may have been on the uptick in past years, but recently and going into 2020, there are some serious threats to our industry. Smooth production is essential to providing oil and gas products to the public at a fair rate. When issues rear their heads, so do outstanding price hikes.
Here’s a look at some of the top 2020 threats facilities across our industry must be on the lookout for in the new year.
Continued Oversupply and Weak Demand
2019 brought in one of the lowest amounts of oil demand. Based in part on the trade tensions between the U.S. and China, the global economy as a whole was impacted.
Increased costs of oil created a surplus of supply and resulted in a drastic reduction in demand in the industry. Even though an early December trade deal could help to improve local demand, the International Energy Agency (IEA) reports that an oversupply still hangs over the global market, threatening further price increases due to reduced production.
Policy Changes in an Election Year
An election year is always considered a threat to the ease of drill site creation and general production. Although we can predict how specific candidates and parties will approach energy policies, the industry can only wait with bated breath to find out what actually transpires after a new President is elected.
Presidential policy changes beyond tariffs could result in further oversupply that harms production as a whole. Although a single policy won’t immensely stall oil and gas production, consecutive small changes eventually will add up.
Difficulty with Greenfield LNG Project Approval
Although there is a recent push for a greener energy industry, LNGs are still a necessary resource for many consumers. However, despite the growth of export in this coveted resource, our industry consistently faces difficulty getting desired long-term drill projects sanctioned.
Many greenfield developers may have a difficult time searching out new sites because most sanctioned projects are now brownfield sites that are working with accumulation that is on the decline.
While these issues were difficulties developers had to live with in 2019, they are expected to remain in effect for 2020 due to:
- Continuously limited contract terms
- Trade Tariffs
- Low Oil Prices
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