Oil and Gas World Report: Developments in the International Oil and Gas World at a Glance
By Miguel Suazo and Chelsea Allen
The current U.S. oil and gas market is nothing if not dynamic. Domestic producers continue trying to balance relatively depressed oil prices against comparatively prolific production levels, and, in certain regions, drilling booms have spurred U.S. exports despite stubbornly checked global prices. In the global and international oil and gas markets there are many notable developments under way as well. Prices are still hovering around the fifty-dollar mark worldwide, though price volatility remains a global concern. Many multi-national corporations are working to expand into new and often potentially risky markets amid regulatory, economic, or political constraints in their search for new or better fields to develop.
In Europe, for example, the French oil and gas conglomerate Total announced plans this summer to expand operations into Iran. Total’s willingness to bear the risks associated with operations in an unstable nation may be prompted in part by French President Macron’s apparent determination to ban new permits for oil and gas exploration in France and its territories by the year 2040. Total has also recently acquired Maersk Oil for a reported 4.95 billion from Danish A.P. Moller-Maersk, the global shipping giant. The acquisition expands Total’s global production capabilities, especially in the North Sea. Total’s CEO, Patrick Pouyanne, says that the company’s recent purchase takes advantage of the low prices and costs in the current market climate, which he suggests is an ideal time for savvy companies to “either launch new projects or acquire new reserves at attractive prices.”
In the Middle East, change is also stirring. Saudi Aramco, Saudi Arabia’s government-owned oil and gas company, is set to expand the company into India within a few weeks, and, in an unprecedented move for the state-owned conglomerate, is also planning an initial public offering (“IPO”) of Saudi Aramco in the coming year. While London and New York are reportedly the most likely markets for this initial offering, the Saudi’s have not yet announced which of the two it will be.
In Asia, though China currently remains Asia’s largest total consumer of petroleum products, some anticipate that India’s fuel consumption will grow by about 6% in 2018, putting it on track to outstrip China as Asia’s fastest-growing petroleum consumer.
In South America, steps are being taken to boost exploration, especially offshore. Several countries are working to loosen regulations on foreign investors, and some are actively courting foreign oil companies. Brazil, for example, has been auctioning off oil and gas blocks for offshore exploration to foreign investors. ExxonMobile – who, incidentally, also increased its holdings in the Permian Basin in the U.S. this year – was among those with a winning bid, ultimately coming away with 10 of the coveted Brazilian oil blocks. Argentina has similar plans to auction offshore blocks starting next year, diverting attention somewhat from its active shale fields in order to focus on the potential of its offshore reserves.
Given the political and economic interconnectedness of global oil and gas markets, most of these developments are probably a net positive for U.S. markets, at least in terms of healthy levels of demand and competition despite growing uncertainty. While all oil and gas exploration and development involves risk, operations in other countries invariably involve much greater risk and wholly different sets of operational challenges. Producers with an interest in operating in a particular world region or country should give serious attention and study to the dynamics of producing in that specific market. We encourage such producers to contact us for assistance with evaluating opportunities abroad. We will continue to monitor developments in the international oil and gas market, and encourage readers to check back frequently for updates.