In-depth interpretation of the domestic and foreign oil and gas industry development report: the global oil and gas market will enter a period of change

On April 16, 2021, the "Report on the Development of the Oil and Gas Industry at Home and Abroad" was released in Beijing. According to the report, with the clarification of the goals of carbon peak and carbon neutrality in the world's major economies, structural changes on both sides of oil and gas supply and demand will be deeply triggered, and the oil and gas industry is accelerating its transformation and upgrading. In the next five years, the global oil and gas market will enter a period of change, and natural gas will continue to be the fastest growing fossil energy in demand.

 

In the past year, under the dual pressure of the new crown epidemic and the global economic downturn, the global petroleum and petrochemical industry has been severely impacted, with primary energy consumption falling by 4.5% year-on-year, energy-related investment falling sharply by nearly 20% throughout the year, and newly discovered oil and gas reserves falling sharply by 30% year-on-year. Since 2021, with the global use of new crown vaccines, the epidemic is gradually being contained, and the oil and gas industry will likely enter the recovery stage, and international oil prices are expected to rise year-on-year, with the annual average price of Brent at 62~67 US dollars / barrel. At the same time, with the clarification of the goals of carbon peak and carbon neutrality in the world's major economies, follow-up actions will be gradually rolled out.

The report believes that the growth rate of world oil demand will gradually slow down after the resumption of growth in the post-epidemic era, the oil supply capacity will remain sufficient, and the international oil price will remain at a medium and low level, and the operating center is expected to be 60~70 US dollars / barrel from 2021 to 2025. In the next five years, the development of the global natural gas market will enter a period of change, natural gas will continue to be the fastest growing demand for fossil energy, and the regional consumption structure, supply pattern, and trade and investment patterns will continue to adjust.

During the "14th Five-Year Plan" period, China's oil and gas industry will enter a new era of accelerating reform and comprehensively promoting high-quality development under the new stage of building a modern socialist country and the new goal of "3060 dual carbon". It is expected that by the end of the "14th Five-Year Plan", oil demand will gradually approach the peak platform of 730 million ~ 750 million tons, natural gas is still in a period of rapid development, reaching 420 billion ~ 500 billion cubic meters in 2025, and the receiving capacity of imported LNG will be increased on a large scale.

In 2020, the new crown epidemic has hit the world economy and the oil and gas industry into a trough, and the world oil market has set a number of memorable "historical highs". The Brent-WTI futures spread narrowed significantly, and the Brent-Dubai crude spot spread inverted for most of the year. The price independence of Shanghai crude oil futures has begun to appear, and its position as the world's third largest crude oil futures has been further consolidated.

The pandemic and OPEC+ production policies will remain the two core factors affecting the world oil market in 2021. On the whole, the recovery of world oil demand, OPEC+ continues to carry out effective supply management, the fundamentals of the world oil market will continue to improve since the second half of last year, supporting the rebound of international oil prices, but the remaining production capacity is at a high level, the inventory level is still high and the decline in upstream costs will restrict international oil prices to rise sharply, and the baseline scenario is expected to average Brent annual price of $62-67 / barrel.

While the world's oil consumption has fallen sharply, China's apparent oil consumption has achieved rapid growth, with a total of 702 million tons. China's refining capacity increased to 870 million tonnes per year, and the diversification of operating entities further developed. The domestic petrochemical industry has made outstanding contributions to winning the battle against epidemic prevention and control. 2021 is the first year of the "14th Five-Year Plan", and the government work report proposes that the GDP growth rate is expected to reach more than 6.0%, which will effectively drive the recovery of China's oil market.

After a strong rebound in 2018-2019 and a record high in development, the global natural gas industry chain suffered the double impact of the new crown epidemic and the collapse of oil prices in 2020, and the main market indicators showed "three declines, two slowdowns and one stagnation". Investment in natural gas projects has been cold, and global natural gas trade has been greatly impacted. However, at the end of the year, affected by the cold winter temperature, the main market demand rebounded significantly. The risk of non-traditional supply security and sharp price fluctuations brought by extreme weather and emergencies to the natural gas market is worth paying attention to.

A strong rebound in the global natural gas market in 2021 is a high probability event. With the recovery of fundamentals, the prosperity of the global natural gas market will pick up, and the competition between the demand side and the supply side will continue to increase. In the future environment of climate change, natural gas will still be the fastest growing fossil energy for a long time in the future, and together with non-fossil energy, it will become the main body of energy consumption increase.

In 2020, China's natural gas market was outstanding, with China's natural gas increasing by 7.1% year-on-year against the backdrop of a 3% year-on-year decline in global natural gas consumption. Steady progress has been made in infrastructure construction, and new progress has been made in the interconnection project. It is expected that the growth rate of natural gas demand will rebound in 2021, and the supply and demand will be basically balanced. In the context of the independence of the national pipeline network and the opening of third-party infrastructure, the effect of natural gas market-oriented reform has emerged, the market players have diversified, and the supply capacity has been improved. The problems faced by the construction of China's natural gas security system are urgently needed to be solved: the safe and stable supply of imported gas, the development of inferior natural gas resources, the construction of production, supply, storage and marketing system, and market-oriented reform.

In 2020, the spread of the new crown epidemic hit the oil and gas industry hard, and the operating performance of international oil companies suffered a heavy blow, and production generally declined; Domestic oil companies have seen a steady increase in production and have achieved profitability for the full year.

Major international oil companies quickly adjusted their business strategies, significantly reduced the scale of investment, lowered production targets in a timely manner, and adopted a series of measures to strengthen cost control. The three major domestic oil companies have actively fulfilled their political and social responsibilities, focusing on epidemic prevention and anti-epidemic on the one hand, and stable production and operation on the other, and have made outstanding achievements in ensuring the smooth operation of the industrial chain, fighting the epidemic and ensuring supply, digging deep into the potential of the entire industrial chain, and improving quality, efficiency and reducing costs. At the same time, we will accelerate transformation and development, accelerate digital construction, develop green and low-carbon energy business, and create new business formats and models.

It is suggested that oil companies can maintain moderate investment flexibility in the future, pay close attention to opportunities in global asset restructuring, and reasonably control the pace of investment in the development of new energy business to ensure the success of transformation.

Actively promote the energy transition around the "dual carbon" goal. In 2020, we will unswervingly promote the opening up of mining rights and refined oil exports, steadily promote the construction of the energy legal system, and embark on a development path of "low-carbon", "market-oriented" and "legal".

Looking forward to the "14th Five-Year Plan", in the face of internal and external risks and challenges, energy and resource constraints, climate change and other issues, China will base itself on the new development stage, adhere to the new development concept, take promoting high-quality development as the theme, create a good external environment for the development of the oil and gas industry, continue to deepen the supply-side structural reform dominated by refining and chemical, and firmly promote the low-carbon transformation and development of the industry in accordance with the requirements of the "dual carbon" goal, and adhere to the "green and low-carbon", "fair and open" and "efficient and high-end" development. The oil and gas industry will enter a new era of accelerating reform and comprehensively promoting high-quality development.

In 2020, global upstream investment fell sharply by 30%, and the scale of investment entered a trough in nearly 10 years. Global oil and gas exploration and development have fallen into a downturn, with the number of oil and gas discoveries and newly discovered reserves significantly decreasing, and the newly discovered oil and gas reserves falling by 30% year-on-year. Investors are more cautious about upstream project development.

Under the same epidemic and low oil prices, China's exploration and development has taken a diametrically opposite trend compared with foreign oil and gas exploration. In order to ensure national energy security, in accordance with the requirements of the state to increase domestic exploration and development, enterprises have adjusted their investment strategies, effectively controlled costs, and increased oil and gas production and reserves. The new proved geological reserves of oil and natural gas reached the peak level of 1.32 billion tons and 1.29 trillion cubic meters respectively. Oil and gas production reached 195 million tons and 188.9 billion cubic meters respectively, an increase of 1.6% and 8.9% year-on-year respectively.

Looking forward to 2021, as oil prices gradually stabilize, global upstream investment will bottom out, and the recovery effect of the engineering technology market will also appear in the second half of the year. China's oil and gas exploration and production has maintained an accelerated state in accordance with the seven-year action plan, and oil and gas production is expected to continue to increase. It is estimated that the output of crude oil will be 198 million tons, and the output of natural gas will exceed 200 billion cubic meters.

The pandemic and the great power game have caused chaos in the international community, disrupted the global governance system, caused a severe recession in the global economy, and hit the energy industry hard. Under the tremendous economic pressure, the foreign cooperation policies of oil and gas resource countries have developed in a more relaxed direction as a whole. In 2021, the overall overseas risk is on the rise, and geopolitical risk has become the most important risk. In the future, the investment risk of the global oil and gas industry depends on the changes in Sino-US relations and the introduction of new US policies.

In 2020, the overseas oil and gas cooperation of Chinese enterprises was affected to varying degrees, and on the whole, under the strategy of adhering to low-cost development and prudent investment, the reserves increased steadily, the production decreased slightly, new breakthroughs were made in asset optimization and inter-enterprise project circulation, and overseas LNG capacity construction and refining project cooperation became new bright spots.

It is expected that in 2021, the international cooperation of Chinese enterprises will continue the trend of 2020: in terms of strategy, the core is to manage existing projects well; In terms of business layout, there are more cooperation in natural gas projects than in oil, and the downstream is faster than the upstream. In the next three to five years, Chinese companies will take advantage of the oil and gas M&A market window to obtain more high-quality projects.

Carbon peaking and carbon neutrality will deeply trigger structural reforms on both sides of oil and gas supply and demand, and promote the transformation and development of the petroleum and petrochemical industry.

For the development of hydrogen energy in the oil and gas industry, the press conference believes that this will become an important choice for the low-carbon transformation of oil companies, and it should be actively and prudently promoted. Hydrogen energy and the oil and gas industry chain are naturally closely linked, and major international oil companies continue to maintain their attention to the field of hydrogen energy and fuel cells. As a secondary energy source, the role of hydrogen is to make up for the shortcomings of electrification and assist the better development of renewable energy.

It is suggested that China's hydrogen energy development should adhere to the original intention of environmental protection, aim at green hydrogen, and cultivate market competitiveness; Study the development strategy of the hydrogen energy industry from the perspective of energy, and do a good job in top-level design; accelerate breakthroughs in key core technologies of hydrogen energy and fuel cells; Multi-departmental coordination, continue to improve relevant policies, standards and regulations, and break down barriers to development. It is recommended that oil companies pay attention to hydrogen energy as soon as possible, do a good job in technology accumulation based on their own advantages, and participate in the formulation of technical standards; implement open innovation and do a good job in demonstration projects; Actively and prudently promote the development of the hydrogen energy industry.

In the past five years, the growth rate of world oil demand has slowed down, the growth rate of oil supply has exceeded the growth rate of demand, and the market fundamentals are generally loose, especially the new crown epidemic has brought a huge impact on both sides of the market supply and demand in 2020, and international oil prices are significantly lower than the "Twelfth Five-Year Plan" level. In the post-epidemic era, the growth rate of world oil demand will gradually slow down after the resumption of growth, the oil supply capacity will remain sufficient, and the international oil price will remain at a medium to low level, and the operating center is expected to be 60-70 US dollars per barrel from 2021 to 2025.

In the past five years, international natural gas demand has grown rapidly, the supply subjects have become more diversified, the market supply and demand have increased, and the trade activity has continued to increase, and the international gas price has decreased by 20%-50% compared with the "12th Five-Year Plan" period. In the next five years, the development of the global natural gas market will enter a period of change, natural gas will still be the fastest growing demand for fossil energy, and the regional consumption structure, supply pattern, trade and investment model will continue to adjust, bringing many uncertainties to the market.

During the "14th Five-Year Plan" period, China's oil and gas industry will enter a new era of accelerating reform and comprehensively promoting high-quality development under the new stage of building a modern socialist country and the new goal of "3060 dual carbon". At the end of the 14th Five-Year Plan, oil demand will gradually approach the peak platform of 730 million to 750 million tons, and natural gas is still in a period of rapid development, reaching 420 billion to 500 billion cubic meters in 2025, with an average annual increase of more than 20 billion to 30 billion cubic meters; The ability to guarantee oil and gas supply will continue to increase, domestic crude oil production will rise steadily, natural gas production will reach 235 billion to 250 billion cubic meters, and the capacity of imported LNG will be increased to 190 million tons per year. The oil and gas industry needs to make further efforts to support the healthy development of the industry with a high-quality supply guarantee system.