The oil price is expected to push above US$60 per barrel due to both (geo)political reasons (in particular tensions in e.g. Venezuela and Libya, along with US sanctions in other countries like Iran), as well as to a convergence of interests between OPEC and Russia, both of which have declared their intention to limit production levels. However, with a rising US production this is not necessarily sustainable on the long run. Saudi Arabia has indeed a short-term interest to push up the oil price in order to better valorize Saudi Aramco’s possible partial privatization.
In the long run however, the Kingdom, with the world largest low-cost oil reserves and aware of the importance of energy transition worldwide and the risk of sitting on stranded reserves, will have a clear interest to fight for market shares and not for price. Oil prices are hence expected to remain between US$50 and US$80 per barrel until 2040. For short periods of time, the price may spike in any direction, responding to short term economic, financial and/or political events, rather than fundamental long-term market realities. The current oil price of US$60-70/b already incorporates in our opinion a geopolitical risk premium of some US$10-20/b.
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According to the US Energy Information Administration (EIA), US dry gas production is expected to continue to increase through 2050, along with net gas exports. The United States became a net gas exporter in 2017, as the boom in domestic production reduced the need for gas imports from Canada and raised pipeline gas exports to Mexico and LNG exports. Total dry gas production should increase by nearly 1/3 between 2019 and 2050, from around 960 bcm in 2019 to over 1,270 bcm in 2050. Most of the growth would come from the continued development of tight and shale resources in the East, Gulf Coast, and Southwest regions, which accounted for 68% of the US gas production in 2019 and will reach 78% in 2050, while production should decline in other regions. With the commissioning of new LNG export projects, LNG exports are expected to triple, from around 1.7 Tcf (48 bcm) in 2019 to 5.8 Tcf (164 bcm) in 2030, and should remain stable through 2050.
According to the Gas Inquiry 2017-25 Interim Report released by the Australian Competition and Consumer Commission (ACCC), the supply-demand balance for 2020 in the East Coast gas market and in the Southern States of Australia has slightly improved since the latest forecast (July 2019), due to an expected increase in gas production on the east coast.
The Ministry of Coal of India is considering transforming Indian state-owned coal mining company Coal India Ltd (CIL) into an integrated energy company by allowing it to develop pit-head coal-fired power plants. CIL could also diversify into coal gasification with a target of 50 Mt by 2030 and into solar power generation, with a target of 5 GW of solar power capacity by 2023-2024.
Saudi Arabia intends to increase gas and petrochemicals exports in bid to diversify its export base away from crude oil. To do so, the Kingdom will develop a national plan related to the circular carbon economy, in which CO2 emissions are reduced, reused, recycled and removed (4R), and to provide the country with all the necessary energy.
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