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Editorial comment

‘Tis the season for energy industry outlooks. And there is a common theme across the many reports that I have read so far: uncertainty. Every year, forecasts for the sector come with the disclaimer that uncertainties abound, with a reminder of the hazards of making predictions in such uncertain times. But after several ‘unprecedented’ years, this task has become more treacherous than ever.

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“Rarely have predictions for an upcoming year been so difficult and wide-ranging”, warns ING in its global economic outlook for 2023, which goes on to forecast a tighter oil market for the year ahead (as a result of a fall in Russian supply and continued OPEC+ supply cuts) as well as tough times for the European natural gas market.1 ING does not expect the LNG sector to be able to fully offset falls in Russian gas flows, so demand destruction will need to continue to ensure adequate supply for next winter, resulting in prices remaining at elevated levels.

In its ‘2023 Oil and Gas Industry Outlook’, Deloitte comments on the “unique” situation that the industry faces today, with a mixture of economic, geopolitical, trade policy and financial factors exacerbating the issue of underinvestment and triggering a readjustment in the broader energy market.2 The report explains how the three components of a balanced energy equation – energy security, supply diversification and the low-carbon transition – are under severe pressure. Whilst stressing that it is difficult to predict how and where the industry will invest in the future, Deloitte lists several factors that will likely determine the investment trajectory in the year ahead, namely: the balance that oil and gas producers strike between increasing investment and continuing capital discipline; the role of oil and gas companies in accelerating and securing the energy transition; the dynamics of natural gas demand and the resultant policy environment; the trajectory for deal-making amid the interplay of energy security and transition; and the refining industry’s adaptation to the readjustment in energy markets.

Deloitte notes that refineries could be faced with weakening demand, recession concerns, and a projected 1.6 million bpd increase in global refining capacity in the coming year. “Faced with uncertain demand and volatile prices, refiners are rethinking their investment strategies to include altering product yields toward high-margin petroleum and chemical products while also repurposing infrastructure for clean energy options such as renewable diesel.” Nearly 40% of the oil and gas executives that took part in Deloitte’s survey view refinery modification for low-emission fuels as essential to maintaining growth in the coming years.

In this issue of Hydrocarbon Engineering, you can read another outlook for the year ahead, courtesy of Alan Gelder, Vice President of Refining, Chemicals and Oil Markets at Wood Mackenzie. In this exclusive piece, starting on p. 8, Alan reflects on the challenges that the downstream sector faced last year. He also examines the refining outlook for the year ahead, asks if there is still value in petrochemical integration, and explains how the refining industry is adapting its investment strategy.

  1. BRZESKI, C., ‘May he live in interesting times – ING global economic outlook 2023’, ING, (8 December 2022).
  2. ‘2023 Oil and gas industry outlook’, Deloitte.

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