Global oil demand is expected to peak in 2030 and then begin to shrink, with natural gas and renewable energy becoming a new generation of energy solutions. By 2040, at least one-third of the world’s electricity will be provided by wind and solar energy, one-third of urban vehicles will be electric, and the energy efficiency ratio of the global economy will increase by one-third. In order to slow down the impact of climate change, investors have withdrawn from the coal industry. The coal industry has entered the dusk, and it is expected that the oil era will usher in the sunset between 2030 and 2040. The energy industry needs to choose its future path, choosing between a Bray Priest strategy or a sunset ride.
Bray Priest Strategy
From 2011 to 2014, the average price of crude oil exceeded US$100/barrel. In 2019, Saudi Arabia was unable to make the average price of crude oil exceed US$70/barrel by cutting production. The growth of energy demand in countries such as China and the United States has begun to slow down. Although India’s energy demand growth rate is extremely high, its total amount is too small to lead global energy development. In the case of slow demand growth, not only new oil supplies need to consider the possibility of long-term investment, but the original oil suppliers also need to consider the future path.
The picture shows the primary energy consumption of China, the United States and India
As the world moves towards natural gas and renewable energy, it is expected that by 2040, one-third of global vehicles will be powered by electricity, one-third of electricity will be provided by wind and solar energy, and 85% of global oil consumption is now For combustion purposes. After oil’s golden age is over, oil and gas companies are likely to adopt two strategies to respond.
The first option is the Vicar of Bray. The Vicar of Bray is a satirical 18th-century song about a vicar in Bray, Berkshire, who twisted his principles in order to retain his church ministry. The clergyman successfully retained his ecclesiastical ministry through the changes from Charles II to George I. Regardless of who takes power amid the changes, the priest will retain his position in Bray. Extending it to the energy industry, it can be said that even if global energy changes from oil to natural gas and renewable energy, energy companies can still occupy an important position in the energy field.
Through good timing and graceful execution, oil and gas companies maintain leadership, capital and people capabilities as the energy industry transitions from fossil fuels to clean energy . An early attempt was BP’s Beyond Petroleum rebranding in 2000 under Lord Browne, which invested $8 billion in clean energy, some of which were later written off. Shell attempted to acquire Siemens Solar in 2002, hoping to gain an industry leadership position in the emerging solar field. Six years later, Shell sold the subsidiary and the operation failed. David Crane, NRG’s former CEO, also suffered a setback while trying to transform the company into a clean energy company.
The picture shows the proportion of global oil reserves (2019)
In the near future, major European oil companies are planning a Bray Priest strategy. Statoil, which has been investing in offshore wind energy and carbon capture and storage, recently renamed the company Equinor, removing Oil from the name. The Reverend Bray strategy may require more disruptive innovation, but building clean energy businesses within oil and gas companies faces resistance from capital markets.
Clean energy companies are roughly divided into two categories: one is technology providers, and the other is asset-based enterprises. Fossil fuel investors understand all the exploration and development risks, sovereign risks, and even interest rate risks, but less about how to expand into technology providers. Asset-based clean energy businesses are less risky than oil and gas business development but typically generate smaller returns on investment. Investors who invest in oil and gas, looking for volatile yet lucrative returns, don’t invest in clean energy.
Sunset Tour
The Second Type of Oil & Gas Company The choice is the Sunset Ride. Accept the expectation that the fossil fuel industry is about to enter a long-term decline and manage its business accordingly. The sunset is long and slow. The world will be using fossil fuels and petrochemicals for decades to come, and companies that embark on the sunset journey will have a broad, revenue-generating future, even if there is an ultimate time limit. In a declining market, the only safe place is at the bottom of the cost curve. An oil price of US$40-60/barrel is a safe price scenario for a sunset trip. Below US$40/barrel, developing countries will lead a surge in demand. Above US$60/barrel, a large amount of unconventional oil production will grow and accelerate. The growth of oil alternatives.
Oil and gas companies that conduct sunset tours must be ethically��
The picture shows the production of several countries with large oil reserves in 2018
Environmental groups represented by Green Power in Europe, the United States and Canada will force some oil producers to follow the path of Pastor Bray. On the other hand, in European countries such as Canada and Germany, the oil industry does not play a pivotal role in national decision-making. The rise and fall of oil companies does not affect the development of the country. Canada’s oil industry contributes approximately 16% of Canada’s GDP. . Oil-producing countries such as Norway, as the North Sea oil fields continue to deplete and calls for clean energy continue to rise, have rationally chosen to continue to develop the giant Johan Sverdrup oil field by obtaining shore power hundreds of kilometers away and building 100,000 to 200,000 meters The submarine oil and natural gas pipeline not only achieves an operating cost of less than US$1 per barrel, but also achieves carbon dioxide emissions of 0.67 kilograms per barrel, while the world average is 18 kilograms of carbon dioxide emissions per barrel. In countries where oil is the main industry, even if green environmental protection groups are active, they will still choose sunset tours, but it will reduce carbon dioxide emissions and reduce the social and moral pressure on environmental protection organizations.
3. Nigeria
The future of Nigeria is not optimistic. Countries such as Nigeria, Angola and Chad may face tragic consequences in the post-oil era. On the one hand, Nigeria’s oil production is outsourced to oil companies such as ExxonMobil, and production costs remain high. On the other hand, countries like Nigeria do not have their own industrial system. Nigeria’s gasoline is obtained from the international market through oil-for-gasoline exchange. Countries such as Nigeria, Angola and Chad have neither Saudi Arabia’s hundreds of billions of foreign exchange reserves and Saudi Aramco’s valuation of 1.5 trillion, nor Norway’s $1 trillion fund for rainy days.
The picture shows the changes in the national debt of Nigeria and Angola
Nigeria and other countries There are not enough foreign reserves to go down the path of Bray Priest, nor the ability to go off into the sunset due to higher crude oil production costs. To make matters worse, countries such as Angola and Chad like to conduct U.S. dollar advance transactions with Glencore and Trafigura. Glencore and Trafigura paid upfront in U.S. dollars, and Angola and Chad repaid them later in oil. Such an operation is extremely vulnerable to a collapse in oil prices, and one year Chad’s entire oil production was used to repay the dollar advance. It is expected that in 2040, countries such as Nigeria, Angola and Chad will be removed from the international crude oil market and become full of poverty or war. </p
