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  • This Quarterly Risk Outlook examines the major investment, geopolitical and energy transition-related risks shaping the global oil and gas operating environment in Q2’22 and beyond. The aboveground investment risk impact of intensifying disputes about the governance of the Kurdistan Regional Government’s (KRG) oil sector and the death of UAE President Sheikh Khalifa bin Zayed al-Nahyan are both highlighted. Elsewhere, the latest iteration of Libya’s long-running political saga, Hezbollah’s losses in Lebanese elections, Brazilian regulatory instability and Romania’s changes to its offshore law, among others, are key risk drivers. Geopolitically, the knock-on effects of the war in Ukraine—ranging from Caucasian stability and Russia’s Africa strategy to Chinese and India foreign policy—are a key focus of this quarterly. The impacts of the war in Ukraine—alongside Colombian and Australian elections—is also one of the main drivers of transition risk this quarter.
    Tue, May 31, 2022
  • The fallout from the war in Ukraine is transforming Russia’s risk environment, elevating long-term investment, geopolitical and transition risks. While public support for President Vladimir Putin is holding steady, mounting war casualties and failure to achieve key military objectives will elevate risks associated with political instability, especially as the full brunt of economic pain sets in. Russia faces a deep contraction this year and next due to sanctions and capital controls. The Kremlin’s desire to maintain a stable ruble suggests the appetite for further inflationary fiscal support packages may prove limited. The energy sector also faces long-term challenges. Crude output levels may face permanent declines, while Russia will struggle to replace European gas markets with Asian ones. Geopolitically, the crisis is creating a prolonged nadir in Russian-Western relations. However, Moscow’s decade-long global diplomatic engagement proved prudent, with many Latin American, African and ostensible US Mideast allies striving to preserve neutrality and their ties to Russia. Russia’s dependence on Western and East Asian capital and critical tech imports may undercut hydrocarbon adaptation and long-term economic diversification efforts, complicating is ability to meet its nascent transition goals.
    Tue, May 24, 2022
  • Russia’s invasion of Ukraine is set to impact global transition risks through major energy policy shifts and rising geopolitical tensions. This Transition Risk Outlook also examines the impact of major commodity price increases in oil, gas and many key low-carbon energy inputs. These changes may lead some producers to de-prioritize energy transition goals in the short term, but it will also provide more breathing space and resources to invest in energy transition initiatives as well as economic diversification efforts. Private oil and gas investment may also grow, which increasingly is bringing new low-carbon activity as well. We have also added five new producers—Congo (Brazzaville), Ecuador, Equatorial Guinea, Gabon and Suriname—to the Transition Risk Index. Adding these producers rounds out coverage of Opec and helps expand the index’s coverage geographically and by producer type.
    Thu, Apr 28, 2022
  • Nigeria is the most populous Opec country and Africa’s largest crude exporter, but its oil sector has stagnated, posing key socioeconomic challenges. Growth is still closely linked to hydrocarbon revenues, and the economy took major hits from the 2014 oil price crash and the 2020 pandemic. Abuja is implementing new policies—headlined by the passage of the long-delayed Petroleum Industry Bill (PIB)—to boost investment. Nigeria is also focused on debt management and increasing transparency within its corruption- plagued public and oil/gas sectors. Domestic societal and security issues—particularly in the oil-rich Niger Delta—remain, with the government struggling to reverse these trends. Nigeria is also beginning to prepare for the energy transition, unveiling new targets and strategies. From a Country Risk Index perspective, Nigeria is a high-risk country, ranking 53rd of 71 global jurisdictions on a risk/reward basis.
    Mon, Apr 11, 2022
  • This month’s barrage of rockets and drones targeting both oil sector assets and other critical infrastructure in Saudi Arabia signals an escalation between Riyadh and its Houthi adversary in Yemen. These risks will persist while Saudi Arabia remains involved in Yemen’s ongoing civil war. The UAE is seeking to distance itself from the conflict, but the involvement of UAE-backed groups in recent fighting is prompting the Houthis to continue targeting Emirati assets. While Saudi and UAE air defense systems boast high interception rates, recent attacks demonstrate higher degrees of precision, increasing threats to critical oil and non-oil infrastructure. Although targeting oil sector assets is not new, aboveground risks are increasing as Houthi capabilities improve. Other critical infrastructure also continues to be targeted, causing disruptions to air traffic, and damaging power stations. The fresh attacks come at a critical geopolitical juncture as Iran, which backs the Houthis, looks to re-enter the JCPOA while ties between the US and its Mideast Gulf partners are increasingly strained
    Wed, Mar 30, 2022
  • Energy Intelligence’s updated external break-even price modeling—part of our proprietary long-term supply/demand forecasts—indicates that the 2022 average external break-even will rise to around $86 per barrel, driven largely by geopolitical concerns. We now see Brent averaging $92/bbl in 2022 and $83/bbl in 2023, a boon for producers with historically higher break-even prices, while high natural gas prices will be an additional benefit for large gas exporters. However, increased import costs, impacted in part by the parallel increases in other commodity markets—along with Russian production declines—is driving the increased break-even outlook. Looking ahead, we expect average break-even prices to decline into the second half of the decade, although some more vulnerable, mature producers will see break-evens rise. As Opec-plus moves to fully unwind its production cuts by September (or potentially sooner), producers that continue struggling to increase crude output will face a limit to their ability to benefit from elevated prices.
    Thu, Mar 10, 2022
  • Russia’s invasion of Ukraine is a defining moment with far-reaching implications, stretching well beyond the conflict zone. Fierce Ukrainian resistance is increasing the risks of an extended war. The odds of the conflict expanding are currently low but rising. For Russia, the consequences are already painful—including tough Western sanctions, diplomatic isolation, a free-falling ruble and rising military costs—and will only grow as the conflict drags on. A resolution is hard to envision as the gap between the two sides grows, and the wider escalatory cycle between Russia and the West intensifies. Geopolitically, the conflict will revive Nato, while at least temporarily slowing the US pivot to Asia. The economic fallout threatens to heighten global risks. For the energy sector, the conflict is raising prices, even without direct supply interruptions or broad energy sector sanctions, but these remain possible. The crisis has prompted a deep rethink of European energy policy, while IOCs are rushing to exit from longstanding investments in Russian industry.
    Thu, Mar 3, 2022
  • As Russia reaches the final stages of a months-long military mobilization around Ukraine, Energy Intelligence sees three broad scenarios about what could happen next each with their own global geopolitical and market implications. In a worst-case scenario, a major, wider war would weigh heavily on global oil, gas and food markets and trigger crippling Western economic sanctions. Short of this, Russian President Vladimir Putin could launch a more limited escalation in Eastern Ukraine to increase pressure on Kiev, while limiting the negative repercussions of a bigger invasion. While Nato rejected many of Moscow’s demands, diplomatic channels remain open and the Kremlin retains key off-ramps which could allow it to de-escalate if it chooses to do so. Military exercises planned later this month will be critical to watch as they could provide either an opportunity to pull back without losing face or a potential springboard for a wider invasion.
    Tue, Feb 1, 2022
  • This Quarterly Risk Outlook examines the major investment, geopolitical and energy transition-related risks shaping the global oil and gas operating environment in Q1’22 and beyond. As is often the case, political developments are driving the investment risk outlook, led by unrest in Kazakhstan and delayed elections in Libya. Elsewhere, Turkey’s economic woes and elections in Australia, Angola, Brazil, Colombia and the US, among others, will be key aboveground risk drivers in 2022. Tensions with Russia over Ukraine—including the possibility of military action—is the key geopolitical risk, while the US-Iran negotiations, China’s economy and a softening of Turkey’s assertive foreign policy will also be important factors. Meanwhile from a transition risk perspective, government efforts to reduce oil and gas emissions—through efforts like enhanced support for carbon capture and storage (CCS) and the increased use of low-carbon power to fuel upstream operations—are a welcome development.
    Thu, Jan 20, 2022
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