Whether it's the movement away from fossil fuels towards renewables, or increased levels of digitisation and adoption of new technologies, it's fair to say that energy is a sector in transition on multiple fronts.
In the last of this three-part series, US energy editor Derek Brower tells us more about the current trends in the energy space and where the industry is headed.
Why is the energy sector of such interest to FT readers right now?
Derek Brower: Energy is so seminal to the global economy, but people who operate in any sector can get tunnel vision. They focus so much on their own practices, so much so that they forget about the broader changes that are underway in the economy. One of the strengths of the FT is that we report on everything, and when executives read the FT they can get some insights from other industries. The energy industry right now is undergoing such huge flux.
How are new technologies impacting the energy space?
DB: All those wonderful things that have been somewhat mainstream in other sectors for the past decade are now starting to appear in the energy sector, which is making it more efficient, and cleaner.
It's always felt that its reputation has been a bit unfair, and that it's seen as somewhat backward and lacking in the advances that are seen elsewhere. But these days, the industry is starting to come into its own as a destination and a consumer of some of the most advanced technology. You only have to go into a data room where they're looking at seismic 4D displays of how reservoirs will be migrated underneath the surface of the earth to understand. Technology is advancing in a big way, and the energy industry is the place to be.
What are some of the big trends that energy professionals should be following in the FT?
DB: It seems that the oil market crash has faded somewhat, and it seems that the worst is over. The oil market has stabilised around $40. It does feel a slight phoney recovery at the moment, and I don't think anybody really has a great deal of faith that this is where the oil price belongs, given the substantial hits to demand.
The fact that demand may never recover to the level it was before the crisis, the fact that oil production is increasing already, these are the big themes. What happens to the oil market is the seminal theme for all of energy.
The next major theme is the bankruptcy story in the US, and whether that gives way to another recovery story. Every other price crash in the oil market has been followed by a boom of some kind. Has the cycle broken? It’s doubtful.
So it's a question of timing: when does the story shift from being about the shale companies going bankrupt, unable to get investors interested in oil production, to a story where it's all about the recovery from shale producers and investors scrambling to get back into the sector that's growing again? We're watching out for that shift.
For now, the story is still pretty bleak out there in the oil world, especially for people in the oilfield services sector. Thousands and thousands of jobs have been lost. What happens to that sector? Does it have the capacity, and will it have the capacity in future to be part of an oil recovery?
We've read a lot about the global shift towards greener energy. How do you see that theme developing over time?
DB: The transition is simply the dream story for anybody who covers energy. It's going to last a long time; it's inexorable, it's happening before our eyes. It involves everything, from the big banks, to what's happening on the ground, and on people's rooftops. It encompasses the whole gamut of the energy sector.
The big talking point right now is all about how this gets funded. Does Joe Biden win the election and lead America down an industry transition path with huge capital investment led by the federal government, or does Donald Trump win and try to forestall those developments to try and keep the transition at bay? Even without the policy or politics in all of this, it's true to say that capital markets are pretty much decided that the transition is inevitable.
The question is whether capital markets investors are getting ahead of consumers. If the capital markets and the banks aren't willing to back the oil or fossil fuel projects as they have in the past, consumers at some stage have to be moving at the same speed as those investors, or there aren't going to be enough projects in future for them to rely on when they come to consume more oil, and the demand for oil continues to rise.
And for professionals working outside of the sector, what should they be keeping an eye on in the FT's energy coverage?
DB: The industry has really changed because of the entry of digital providers and the digitisation and technology they've added to it. It's going to continue to speed up too because of the price crash.
If you're going to be dealing in oil in the future, you have to do it much more cheaply, because nobody has a great deal of faith in a long term high oil price. You have to get it out of the ground, you have to do it cheaply, and to do that you probably need techniques that haven't been thought of before. Some of that is already penetrating the US shale sector for sure, but it will spread internationally, and to offshore projects as well. There's going to be increasing involvement by digital and software companies in the energy sector, and that’s really exciting.
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