Trends Influencing the Global Oil and Gas Market in 2023

Major and independent oil and gas companies are steadily completing the deleveraging phase in 2023 to improve their balance sheets.

FREMONT, CA: More and more oil and gas companies, both majors and independents, are completing the deleveraging phase in 2023 as they strive for zero net debt to strengthen their balance sheets.

According to Wood Mackenzie, if oil prices remain over $80 per barrel, oil and gas companies can raise their income, raising the necessary funds to pay off their obligations. The study predicts that energy firms would adopt a dual capital allocation strategy that prioritizes expanding investments while optimizing shareholder profits. Consequently, the global oil and gas business will set a new annual buyback record.

Increased Oil and Gas Investments

With oil, gas, power, renewable energy, metals, and mining investments expected to climb by five percent and reach $1.1 trillion in 2023, Wood Mackenzie expects a ten percent increase in upstream oil and gas capital expenditures from $370 billion in 2020 to $440 billion in 2023. Meanwhile, electrical and renewable energy investments will stay unchanged at $500 billion. For instance, new investments will be made in upstream projects due to the reopening of China's economy and the ongoing energy crisis in Europe, which are driving increasing oil and gas demand. Despite this, global giants such as BP, TotalEnergies, and Shell will continue to invest in extending their renewable energy portfolios.

The repositioning of carbon portfolios by operators

Wood Mackenzie predicts that as the energy transition intensifies worldwide, more oil and gas operators will prioritize emission reductions in 2023, with gas-led operations projected to quicken and carbon capture, storage, and utilization (CCUS) technology becoming more prevalent.

"Net-zero greenfield projects will become more prevalent, although they depend primarily on offsets. The paper claims that carbon-advantaged discoveries will drive disadvantageous discoveries and lower portfolio rankings.

However, while national decarbonization targets will remain a priority, supply security considerations will take precedence. According to the report, mergers and acquisitions will expand as corporations dispose of more underperforming properties to improve their project portfolios. The research group forecasts a rise in private sector investments in upstream projects, as critical participants in the industry aim to maximize the value of cash-generating assets.

National Oil Organizations to Invest in New Supply

National oil corporations (NOCs) will increase their energy investments to raise output and deliver new oil and gas projects in 2022 due to record-high oil and gas prices. While also focusing on CCUS and hydrogen investment, NOCs from oil-exporting nations will prioritize investments that expand their capacity to deliver energy exports. In contrast, NOCs from hydrocarbon-resource-importing countries will prioritize increasing investments in the rollout of exploration and production infrastructure.

Independents will diversify geographically.

To revive investor demand, independents will increase their global footprints and diversify their cash-generating asset portfolios to include additional oil and gas.