Tag: scenarios

Annual Meeting 2020

Day 1 of the 2020 Annual Meeting

The 8th Annual Meeting of the New Producers Group took place from 1–3 December 2020, with a focus on fostering resilience in emerging producers.

The meeting was held in the context of the COVID-19 pandemic, which has precipitated a crash in oil markets, hampered or halted operations across the hydrocarbon sector and caused many oil and gas investments to be delayed or shelved. In addition to these immediate effects, there will be long-term ramifications associated with the global energy transition towards a lower-carbon economy.

The meeting focused on how new producers can adapt their approaches in light of the shocks from the pandemic, and the prospects that the global energy transition will precipitate significant changes in oil and gas markets.

At the outset, the group’s organizers encouraged participants to see the meeting as an opportunity to rethink their assumptions about the value of the oil and gas sector to their countries, and to work together to develop resilient strategies that can benefit emerging and established producers alike. Acknowledging apprehension over the uncertainty of the moment and the long-term ramifications of the global energy transition, the host organizations emphasized the value of capacity building and collaboration across agencies, nationally, regionally and internationally.

A summary of the Annual Meeting is available at the link below.

Fostering Resilience in Emerging Oil Producers

An oil storage tank is seen at the Phillips 66 Los Angeles Refinery in this aerial photograph taken April 21, 2020, when U.S. crude futures plunged below zero for first time. Photo: Bing Guan/Bloomberg via Getty Images

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.