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.

Improved terms and global gas market tightness is driving resurgent interest in Egypt’s Mediterranean resources ahead of upcoming bid rounds. Several discoveries were made in late 2022 and early 2023, but IOCs remain apprehensive about its energy sector management. Cairo faces an economic and fiscal crisis, and its latest IMF agreement includes structural reforms, but it often backtracked in this area in the past. President Abdel Fattah el-Sisi and the military are firmly in control, but Sinai security concerns remain. Egypt aims to use its solar and wind resources to drive hydrogen and renewable investment, but bureaucratic infighting delayed its hydrogen strategy.

Aboveground risk has been limiting Mozambique’s ability to advance its massive LNG projects, but the tide may be turning. The Islamist insurgency in gas-rich Cabo Delgado has been subdued thanks to foreign military assistance. Meanwhile, Eni’s Coral South FLNG came online in late 2022, and TotalEnergies is likely to resume work at its onshore Mozambique LNG in mid-2023. This will likely have positive implications on Maputo’s poor economic and fiscal situation over the medium to long term. However, key risks remain with the insurgency not completely quelled, while concerns about chronic corruption and electoral legitimacy swirl ahead of elections next year.

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.

Oman is advancing energy sector reforms to prepare for the transition and boost state finances. The establishment of an integrated, state gas firm is Muscat’s latest move in reorganizing its energy sector. Like Energy Development Oman, the new firm’s structure is intended to offset energy expenditures from the state budget. However, it joins a long roster of state companies with often overlapping mandates, potentially generating confusion for investors. While high energy prices improved Oman’s outlook, reforms also target diversification into renewables and green hydrogen. Yet, until these sectors develop, Oman remains exposed to price shocks, leaving its progress vulnerable to reversal.

Aboveground risks are rising in traditionally safe Australia. Soaring energy prices and the associated economic and political fallout is leading Canberra to pursue robust market interventions, including a natural gas and coal price cap as well as an extension of the right to limit exports. This will not fix Australia’s supply and demand mismatch, including bringing on new Eastern production or infrastructure to link Western gas to Eastern population centers. Instead, it is fostering producer discontent, threatening new investment unless the Labor government compromises, something it is unlikely to do given popular support for the measures and its energy transition focus.

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.

Many hydrocarbon producers are making policy progress to fight climate change and prepare for the energy transition, despite major global macroeconomic and energy market headwinds. Elections in Australia, Brazil and Colombia saw victories by new, more climate friendly governments, while new US policy could reduce emissions. COP27 saw several new net-zero pledges and emissions reduction targets, with methane a particular focus. However, many key challenges remain, including questions about financing that will have to be addressed if countries are to meet their ambitious goals.

The approval of prime minister Mohammed Shia al-Sudani’s cabinet brings a reprieve from recent political chaos. However, politics remains sectarian and volatile, while questions about Kurdistan and Iran’s role grow. Al-Sudani also pledged to hold early elections next year in a likely attempt to appease Sadrists, which may generate volatility itself. Al-Sudani also faces numerous chronic obstacles, including corruption, water scarcity, energy shortages and an underperforming private sector. For the energy sector, the end of Iraq’s political deadlock reduces imminent supply risks and may enable new projects to advance, depending on the new government’s policies. Addressing Iraq’s natural gas supply deficit will also be important.