Energy Outlook 2023: Oil and Gas

Big Data and digital solutions to improve and streamline activities

Improved data-recording sensors in exploration and drilling can reduce drilling time, improve safety, and optimise production by allowing for predictive maintenance and timely equipment replacement. Technology using seismic data in combination with a company's historic data and research can vastly improve the identification of reservoirs and reduce the cost and time required for exploration. Further, the use can improve supply chain management and improve logistics by detection of faults in pipelines and tankers allowing predictive maintenance in this equipment as well.

The integration of collection, transfer and analysis of raw data in real time is where IoT technology can synergise with big data. In the oil and gas industry this allows real time visibility of faults, environmental conditions and fleet operations while allowing efficient implementation of predictive maintenance and hazard management where required.

Some difficulties in implementing these technologies come from underinvestment, managing data transfer from field to processing facilities and risks in storage of data. Investment in cybersecurity must come alongside implementation if companies are to remain resilient against the increase threats that the technology can bring.

High energy prices will keep the momentum for M&A activity

The historic highs of energy prices and the all-time best average price of oil at $100/bbl over 2022 bode well for oil and gas M&A through 2023. Nevertheless, an uncertain economic environment of inflation and geopolitical tensions may significantly taper this momentum as companies remain mindful of the required capital discipline necessary to navigate these challenges. Acquisition of natural gas assets is likely as majors look to take advantage of the momentum in energy security for natural gas. Further, investment in clean energy and technology such as carbon capture and storage also seem likely as companies seek to diversify, spurred by an accelerating clean energy transition.

Continued interest in investment into low-carbon and renewable energy

The oil and gas majors are seeking to diversify and increase investment in low-carbon and renewable energy during the energy transition. Increased government support, notably the Inflation Reduction Act and REPowerEU, and demand for low carbon clean energy, are creating urgency for many companies to move towards investing in these solutions. This will contribute to accelerating the energy transition which in turn could further bolster demand for low-carbon and renewable energy. As technologies mature and demand increases, investment will continue to look more and more attractive for oil and gas majors seeking to mitigate against long term risks.

Further diversification of activities in the downstream and services sector

In response to demand for green fuel, electric vehicles and possibly hydrogen-powered vehicles the downstream activities of the oil and gas industry are also looking to diversify. The sector has already invested in a wide selection of businesses. These include biofuel manufacturing, renewable generation assets (solar PV and wind) in addition to customer facing business such as energy and fuel sales and EV charging points. There is also indication of diversifying into services such as energy trading in power markets, PPA offerings and behind the meter energy management. Green and blue hydrogen production is a huge area which majors have been venturing into and is an industry which oil and gas companies are well places to take advantage of due to experience in producing and distributing natural gas. Sustained high natural gas prices through 2023 and beyond may make green hydrogen and biomethane more attractive investments than blue hydrogen.