The long-term market fundamentals are robust.
We believe that the long-term market fundamentals are robust – and Petrofac is well positioned to benefit.
Among industry analysts, such as the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) , there is consensus that global energy demand is set to grow strongly over the long term, and that hydrocarbons will continue to play a significant role.
The most recent analysis from the IEA estimates that energy demand is set to grow by almost 30% by 2040 (under the new policies scenario1), by which time the world’s energy supply mix will divide into four broadly equal parts: oil, gas, coal and low-carbon sources. This will see demand for oil growing by 11 million barrels a day, or 13%, to reach almost 105 million barrels a day2. Meanwhile, demand for gas is estimated to grow by some 45% to exceed 5,300 billion cubic metres per year2.
Large-scale investment in oil and gas infrastructure will be required to meet demand growth. The IEA anticipates cumulative investment in the oil and gas sector of US$21 trillion by 2040, which represents an annual investment of US$860 billion.
In its World Oil Outlook 2017, OPEC reaches broadly similar conclusions, and asserts that: “OPEC Member Countries remain committed to supporting investments – in new upstream capacity, in the maintenance of existing fields and infrastructure, in the construction of the necessary pipelines, and in the building and expansion of oil terminals and refineries.”
We therefore expect clients to continue to invest in long-term strategic projects, especially in regions with lower marginal costs of production such as the Middle East and North Africa (MENA) region.
1 International Energy Agency, World Energy Outlook 2017, the new policies scenario is the main scenario which incorporates existing energy policies as well as an assessment of the results likely to stem from the implementation of announced intentions, notably those in the climate pledges for CPO21 (the 2015 United Nations Climate Change Conference, also known as the Paris Agreement).
2 International Energy Agency, World Energy Outlook 2017.