Summary
- COVID-19 and the spring shock to oil markets had significant impacts on the emerging oil and gas producer countries that make up the New Producers Group. The crisis affected individuals, organizations and national plans for hydrocarbon sectors. The group held a series of discussions from March 2020 that aimed to assist governments in the development of crisis responses and strategies
that could be adapted to an energy sector in transition. - In response to a crisis, the main priority is to understand its causes and review its impact. When much of public life shut down due to the pandemic in March 2020, it struck a blow to oil demand at a time when the market was already oversupplied. Oil prices fell sharply, which, together with the health crisis, prompted oil companies to reassess projects, upending operations in many countries.
- While oil prices recovered partially in the months that followed, the sector remains in crisis – particularly in the more expensive emerging oil and gas producer countries. Prior to COVID-19, oil companies were already more risk averse in response to investor pressure.
- The focus of the New Producers Group has turned to understanding what the new normal might look like post-crisis and in particular what impact the pandemic might have on the pace of the energy transition. The development of scenarios helped meeting attendees manage multiple uncertainties, such as the path of the pandemic, its economic impacts, policy responses and public support for the concept of building back better.
- ‘Boom time’ is over for the oil sector. For emerging producers, the poor outlook means that there will be fewer projects and those that do go ahead will be low risk. But even in areas where continued oil company interest is likely, government planners should understand the risks associated with fiscal dependence on the petroleum sector and also with building up industry-specific local content.
- National investment in the petroleum sector should be considered in relation to the potential returns it can generate and the negative impacts it could have on other national objectives, such as climate goals, environmental wellbeing, and fiscal stability.
The paper is available to download below.
You are invited to the launch of the report 3 March 2021 at 2pm GMT.