- Jun 9, 2021 2:50 pm GMT
Whatever the pace of the energy transition, the world will still rely on oil and gas for much of its energy needs until well beyond 2040. Exploration will be critical in meeting this future demand.
- Cumulative Global Demand next two decades = 1100 Billion boe
- Proven Developed Supply = 640 Billion boe
- Supply Gap = 460 Billion boe
- Exploration Supply by 2040 = 100 Billion boe
- This requires new capital investment
- Only resources with the lowest cost & best economics should attract capital. Much of the known resource, however, does not fit the bill.
- Over 100 billion boe – split roughly 50:50 between oil and gas – will come from exploration.
- Companies struggling to decarbonize disadvantaged older assets might even find it cheaper to start afresh with new discoveries.
INSIGHTS NOT MENTIONED
- Core advantaged assets are; low cost, low-carbon-footprint and long-life
- Portfolio resilience is the key; i.e. during business cycles, upside should be highly profitable, and downside should be robust to still yield cashflow, while managing low carbon footprint
- Key metric that best demonstrates portfolio resilience are;
- Post-CAPEX Cash Margin that captures the resilience of a company's producing upstream portfolio to lower hydrocarbon prices; and
- NPV/tonne metric, that is a carbon efficiency measure, showing how much value a company is creating for each tonne of carbon it emits from its upstream assets.
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