Although oil and gas plays a key role in growth strategies, confidence in the sector is declining. Investors, consumers, institutions and governments need to focus more on medium- to long-term objectives, with sustainability and the sector's role in the energy transition as key considerations.

Giuliano Monizza

The European Community's 2030 targets include -40% CO2, +27% renewable energy, +30% energy efficiency. These are very challenging numbers for investments in the oil and gas sector. To complicate the picture, the macroeconomic consequences of Covid-19 have been added. The result is that the oil and gas sector is in the perfect storm. The collapse in consumption, predicted by the International Energy Agency since the beginning of March 2020, has been estimated at around 730/740 thousand barrels per day. In May, the price per barrel fluctuated between 14 and 25 dollars per barrel, in any case far from the economic "break even" value needed by many producing countries to operate with adequate budgets and thus cover the needs of the budget/country.

• Saudi Arabia 83.6 USD
• United Arab Emirates 70 USD
• Iraq 60.3 USD
• Russia 42.4
• Kuwait 54.7
• USA Delaware basin 44.3 USD
• USA Midland basin 44 USD

Tab.1. Oil price per barrel. Break even budget 2020 value (source: Blu Analyticsnews report)

The above figures also make us understand how American production is strategically more competitive. In fact, it can be assumed that countries whose economies are based exclusively on traditional barrels, such as Iran, Libya and Venezuela, are suffering very heavily in all sectors of their economies. Many countries have decided to stop investing and this has had consequences for all companies in the supply chain, suppliers of components and systems. The volume of unsold and now stockpiled oil, which in the meantime is continually being extracted, is considerable, but it is assumed that there are sufficient volumes to meet a sudden recovery in demand after Covid-19. A recovery in demand and barrel prices is expected in the coming months as the pandemic subsides. Many companies have cautiously decided to keep their investments in new fields and R&D on-hold, both in the upstream and downstream processes. Scheduled plant maintenance and 'service' during this period provide a unique operational opportunity, both in terms of the time available to intervene in the production process, and in terms of replacement and 'up grade' of the process with the use of new components.

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