Upstream oil investment 'crucial' during transition says IEA
It is crucial that the oil industry continues to invest in the upstream (exploration and production) sector as it will take years to shift global transport fleets away from internal combustion engines to EVs and other low-carbon alternatives, according to the IEA's Oil 21 report.
Key energy sectors such as aviation, shipping and petrochemicals will continue to rely on oil for some time, it states, yet only a marginal rise in global upstream investment is expected this year after operators spent one-third less in 2020 than they planned at the start of the year.
To meet the growth in oil demand to 2026 in the IEA report’s base case, supply needs to rise by 10m bpd by 2026 - but it is projected to increase by 5m bpd, although a production capacity cushion of a record 9m bpd could keep global markets comfortable in the near term.
The Middle East, led by Saudi Arabia, is expected to provide half that increase, largely from existing shut-in capacity. Asia will continue to dominate growth in global oil demand, accounting for 90% of the increase between 2019-2026.
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The need for ongoing upstream investment illustrates the challenges facing the industry as it is increasingly preoccupied with decarbonization and meeting clean energy and net zero targets. Minimising emissions from core operations, notably methane, remains an urgent priority.
Moreover the Covid-19 demand shock, large scale expansions and expectations of a long‑term structural decline in demand are creating an overhang that can only be eradicated through massive closures.
"The Covid-19 crisis caused a historic decline in global oil demand – but not necessarily a lasting one. Achieving an orderly transition away from oil is essential to meet climate goals, but it will require major policy changes from governments as well as accelerated behavioural changes. Without that, global oil demand is set to increase every year between now and 2026," said Dr Fatih Birol, the IEA’s Executive Director.
"For the world’s oil demand to peak anytime soon, significant action is needed immediately to improve fuel efficiency standards, boost electric vehicle sales and curb oil use in the power sector."
A third wave of worldwide refinery rationalisation is currently underway. Global shutdowns of 3.6 mb/d have already been announced, but a total of at least 6 mb/d will be required to allow utilisation rates to return to above 80%.
China, the Middle East and India continue to drive new capacity growth. As a result, Asian crude oil imports are forecast to surge to 27m bpd by 2026, requiring record levels of Middle Eastern crude and Atlantic Basin production to fill the gap.
The petrochemical industry will continue to lead demand growth, with ethane, LPG and naphtha together accounting for 70% of the forecast increase in oil product demand to 2026. Gasoline demand may have peaked, though, as efficiency gains and the shift to electric vehicles offset mobility growth in emerging and developing economies.
Demand for aviation fuels, the area that was hardest hit by the pandemic, is forecast to gradually return to pre-crisis levels. But a shift to online meetings and conferences – along with persistent corporate efforts to cut costs and hesitation by some citizens to resume leisure travel – could permanently alter travel trends.
McKinsey has highlighted three decarbonization levers, focusing on optimising operations, sustainable design and balanced portfolios.
"Over the years, upstream operators have responded to market and technological disruptions with innovation and resilience," it states. "With an accelerated energy transition, they must do so again."
Global Offshore rebrands Enelift and invests in global hubs
Global Offshore has rebranded Enelift and will invest "a seven-figure sum" in establishing new support hubs in Houston, Dubai, Singapore, Perth and the Caspian during the next six months.
The investment will cover oil, gas and renewables, mainly concentrating on manufacturing capability with associated R&D, as well as in stock held in the hubs.
The company’s flagship Hinge Lok technology provides aluminium, non-welded light weight transportation cradle for casing and tubing. Enelift now plans to enhance its offering by augmenting its existing solutions with robotics and remote operational and training technology, which will reduce manpower for handling offshore equipment that is transported and stored using the Hinge Lok system.
Enelift is partnering with "a Japanese robotics company" and the technology will be trialed with "a Norwegian operator on a Norwegian drilling rig", according to a statement.
Operating from its bases in Aberdeen, UK and Esbjerg, Enelift was founded by 35-year industry veteran and Managing Director Paul Brebner 10 years ago to offer the offshore energy industries safe, reliable and efficient storage and transportation of equipment.
The expansion plans are bolstered by the appointment of Jim Clark of the Craigendarroch Group to Chairman, and Adam Maitland to Non-Executive Director. Maitland is the Managing Director of Hutcheon Mearns IF, and brings his wealth of expertise in the field of corporate finance.
Brebner said Enelift may be a new name in the market, but the experience it brings is "industry renowned".
"Our solutions are underpinned by safety that enables inefficiencies and their associated costs to be eradicated – meaning operational personnel can focus doing what they do best, safely. We remain committed to providing the safest storage and transportation solutions for equipment in the sector as we grow our global operations," he said.
Clark said the market is changing and its solutions fully support customers’ economic and safety aspirations.
"We are very well placed to take full advantage of increasing opportunities in the Middle East, Africa, Far East and Americas. Safety is our absolute commitment to our customers and our support hubs will facilitate this. Aligning our identity to our entire offering ensures that we will drive our expansion through new products and global support sites across the rest of this year."