This Quarterly Risk Outlook examines the major investment, geopolitical and energy transition-related risks shaping the global operating environment this quarter and beyond. In Latin America, frustration with stagnating economic conditions is helping to drive major electoral shifts and protests. Positively, Tanzania’s renewed efforts to boost oil and gas investment are bearing fruit. Wagner’s failed mutiny in Russia, Iraq’s new budget and protests in Senegal are among key aboveground risk drivers elsewhere. Geopolitical risks in this outlook include rising Opec-plus tensions, Iran’s diplomatic detente and the Sudan conflict. Meanwhile, as green investments grow, implementation bottlenecks are shaping up to be a major transition risk driver.

Fighting between the official Sudanese Armed Forces and the paramilitary Rapid Support Forces continues to rage. Energy Intelligence expects prolonged fighting as the most likely near-term scenario, as peace talks drag on and neither seems capable of winning outright. Key outside actors currently support diplomacy, but the odds of them becoming more involved increase as the conflict continues. Energy sector risks in Sudan and its neighbors are rising, while Red Sea trade flows may be threatened if fighting spreads to the coast or undermines the Horn of Africa. The conflict also threatens the fragile stability in neighboring producers in South Sudan, North Africa and the Sahel.

Energy Intelligence’s external break-even price modeling indicates that the 2023 average price needed by Opec-plus producers rose to about $77/bbl, driven by lower volumes and inflated import costs. Lower natural gas prices also contribute to higher break-evens for many gas exporters. We forecast average break-even prices to climb to around $80/bbl in 2024, with a continued increase the following year. We expect the group’s strategy to be broadly supportive of prices above $80/bbl, with leadership monitoring the impact of cuts on market stabilization closely. Group upstream growth, led the Mideast Gulf, continues, but a long-term structural rebound in troubled producers is unlikely.

This Quarterly Risk Outlook examines the major investment, geopolitical and energy transition-related risks shaping the global operating environment this quarter and beyond. Brazil’s new administration is impacting investment risk and Petrobras strategy. The earthquakes in Turkey and Syria will have deep political and economic ramifications. Elsewhere, protests in Israel and Peru, Qatar’s changing LNG marketing strategy, South Africa’s energy crisis and Nigerian elections are important risk drivers. Key geopolitical risk factors include the war in Ukraine, the Saudi-Iranian normalization agreement, rising tensions in the Caucasus and limited Venezuelan sanctions relief. Meanwhile, the growing emphasis on energy security is one of the main drivers of transition risk.

Energy Intelligence’s latest Macroeconomic Outlook focuses on the impact of the uncertain economic recovery on aboveground risk. Critically, inflation and rising borrowing costs weighed on advanced economies, but the tide may be turning as rate hikes slow, inflation cools and economic data remains robust. In Asia, China’s re-opening and supportive policies will boost growth, with positive spillovers. Yet the picture in Latin America and Africa is less rosy and debt concerns are mounting. Meanwhile, Russia’s surprisingly resilient economy faces growing headwinds as revenues fall, war costs rise, and new sanctions take effect. For producers, high hydrocarbon revenues improved the economic outlook, but disincentivized key reforms.

This Risk Outlook examines the investment, geopolitical and energy transition-related risks shaping the global oil and gas operating environment in 2023 and beyond. Growing oil theft and fears of political violence ahead of Nigerian elections as well as economic developments and warming regional relations in Turkey are highlighted. Norway’s frontier exploration limitations, Mozambican and Tanzanian LNG development and the volatile political climates in the UK and Peru are also covered. Meanwhile, Opec-plus dynamics and the impacts of Israel’s election on nascent Arab ties are, among others, major geopolitical risk factors. Meanwhile, COP27 and elections in Brazil are two of the most important transition risk drivers.

European aboveground risks are rising in the face of the energy crisis. As it tries to compensate for lost Russian volumes, high gas prices and supply uncertainty will plague Europe until new ventures materialize mid-decade. This is undermining its competitiveness and transition strategy, threatening long-term growth. Despite its exceptional unity so far, tensions over gas policy and national fiscal responses are beginning to undermine the EU’s cohesion. Meanwhile, Europe is implementing tighter fiscal terms, including new windfall taxes, while gas market interventions are generating uncertainty. Security risks are also rising, exacerbated by the sabotage of the Nord Stream pipeline.

Opec-plus’s average external break-even fell to about $72 per barrel, according to Energy Intelligence’s updated modeling. Yet, it made a 2 million b/d cut, although the market impacts will likely be lower as many producers struggle to meet existing quotas. Notably, mature producers are vulnerable due to inflationary pressures on imports, eroding some current account advantages. With Opec-plus cutting supply as prices reached the low $80/bbl range, we see this as a key factor in the group’s decision-making process. Looking ahead, we now expect the average break-even price to climb to around $82/bbl in 2023 before declining slowly but remaining elevated through 2026.

Recent Russian escalations, including the annexation of Ukrainian territory and partial mobilization, and Ukrainian successes are driving an update of our conflict scenarios. The likelihood of further Russian escalation or some form of Ukrainian victory have risen. However, our base scenario remains continued fighting, before eventually settling into a frozen conflict. Regardless, the escalations and prolonged conflict are raising risks. The partial mobilization is unpopular, while the conflict and sanctions are weighing on Russia’s surprisingly resilient economy. Geopolitically, the moves are likely to reinforce Western sanctions resolve, while risks are spreading beyond Russia to its neighbors in Europe, Central Asia, and the Caucasus.

This Quarterly Risk Outlook examines the major investment, geopolitical and energy transition-related risks shaping the global oil and gas operating environment in Q3’22 and beyond. Iraq’s spiraling political crisis – including the growing likelihood of disruptions to oil and gas activities – and Kenya’s disputed elections are both highlighted as well as other key risk aboveground risk drivers. Iran nuclear talks and rising tensions in Asia are key geopolitical risk factors. Meanwhile, policy developments in the US, Brazil and Australia impact the outlook for energy transition risks and opportunities this quarter.