‘Opportunities there for those who reach for them’

Published: 18th September 2014 | Issue 30 Share article:

Jackie Green

BVAA members should be working aggressively on global sales, especially given the near-term outlook for Europe. There are lots of opportunities, but you will have to reach for them.

Europe Oil and Natural Gas Extraction is down 7.3% from last year and Europe is not likely to be a key growth market for BVAA members in the next two years. Extraction has been generally weakening since 2000, and this will likely persist as environmental regulations greatly restrict access to deposits. Although there is potential for some deregulation in the natural gas drilling industry, it will likely be a while before changes take effect. The fact that Russia is continuing to supply Europe with natural gas means there is less demand for immediate change to regulations.

Further depressing the outlook for Europe’s oil and natural gas extraction industry is the fact that when considering the top 10 countries with technically recoverable shale gas resources, not a single EU member country ranks on the list. To increase Europe’s energy security the region will need to improve efficiencies, develop renewable energies, and import gas from the U.S. and other regions. This suggests that through the near term BVAA members will need to look increasingly outside the EU for sales opportunities in the oil and gas markets.

The energy industry has been shaken up by a recent ruling from the U.S. Commerce Department, allowing two companies to begin exporting an ultralight oil called condensate that requires minimal processing. This move has altered the longstanding U.S. ban on oil exports and may open the door for additional exports in the oil industry. The hydraulic fracturing boom has changed the energy landscape in North America and as much as 13% of oil extracted from shale is of the condensate type which can be exported. The minimal processing requirements may hurt U.S. refiners but could be a boost to overall demand for U.S. oil production should regulations be further eased.

The oil market has been uncommonly calm since 2013, not erring from the $90-$110 per barrel range. North American oil production has been a great stabilizer for global prices. It is generally understood that OPEC likes prices around $100 per barrel, but when normal production quotas break down other non-OPEC sources are now better able to fill the gap. This is insulating international prices from some of the larger market swings that we have seen in recent years. Expect prices to slowly relax from their current levels, but stay above $90 over the next 12 months.

ITR Economics International is able to help your company see tomorrow’s economy today. Confidence about your markets over the next few years will help you lead your business while providing you with a tool to outperform the competition. For additional information on how ITR Economics International can give you a greater planning tool to assist in meeting your business needs or to suggest future article topics, please email jgreene@itreconomics.eu.

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