What next for the oil and gas markets?

In one of the worst downturns for the oil and gas industry in over a decade, we have now seen massive asset write-downs, headcount reductions, oversupply of oil leading to depressed prices, oversupply of rigs, support vessels etc. etc.

It is likely that there will be permanent damage to the industry both tangible and intangible. For instance, some of those made redundant may no longer return to the industry leading to a lost era of knowledge, skillsets and the like. At the same time, various industry leaders are already looking at ways to operate in an economically viable manner with a longer term perspective of a low oil price environment.

In our opinion, we believe the fundamentals are still intact for oil and gas as a key commodity driver and energy source. Till date, there has been no equivalent energy source replacement that delivers the same output equivalent on the same amount of cost. However, the key challenge still remains for the industry - oversupply of assets. We believe this needs to be first addressed in a holistic manner. Perhaps in conjunction with Regulations, or via a Statutory approach - throw in some state support tax benefits etc, but whatever it is, there obviously needs to be more push and lots more to be done in order for the massive asset supply-demand in-balance to improve.

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