Oil and gas will remain crucial to the global energy mix for the foreseeable future despite the growth of renewables. Oil demand is expected to peak within the next decade, but projections indicate that more than half of today’s oil consumption – of around 105 million barrels per day – will persist until 2050. This enduring demand provides stability for NOCs, but they must navigate a market shaped by price volatility, geopolitical shifts and growing pressure to decarbonize.
The outlook for oil prices remains one of the key uncertainties in the near term. Signals in the market suggest 2025 could see a scenario reminiscent of 2015, when global oil prices plunged significantly – due to oversupply – to below $30 per barrel in the northern hemisphere by the start of 2016.
Anne Britt Høydal, Segment Director Governments & NOCs
If this pattern holds true, OPEC countries may be forced to implement deep cuts in production to stabilize prices. This would require NOCs to closely monitor these fluctuations, adjusting their strategies to maintain profitability and ensure long-term stability.
NOCs currently dominate the global oil and gas sector, accounting for 50% of the world’s oil and gas production. These organizations control some of the most competitive oil and gas reserves in the world, providing them with a distinct advantage in an increasingly volatile energy market.
The future of energy production will be shaped by the lowest-cost, least carbon-intensive producers. Here, NOCs are exceptionally well positioned. Many of them operate some of the world’s most cost-efficient fields, allowing them to maintain competitiveness even as pressures mount to reduce carbon footprints.
The international expansion of NOCs has accelerated in recent years. Many of them, when faced with declining domestic reserves and increasing global demand, ventured beyond their national borders, particularly into regions such as Africa, Asia, and South America. This helped maintain their long-term production levels and strengthened their positions as dominant players in the global energy sector. However, international expansion also introduces a new set of challenges – and NOCs must navigate complex geopolitical risks, local regulations and cultural differences.
Yet, the global shift towards renewable and low-carbon energy cannot be ignored. NOCs are confronted with the need to adapt or risk obsolescence, as governments and companies worldwide commit to reducing carbon emissions. In response to this challenge, many of these NOCs are diversifying their portfolios by investing in the likes of solar, wind and hydrogen as ways to reduce their dependence on fossil fuels. This diversification helps NOCs to tap into new growth markets and ensure they remain relevant.
The future of NOCs will be shaped by how successfully they navigate the complex interplay of maintaining traditional energy production while embracing renewable alternatives. The balance of meeting current oil demand and preparing for a cleaner, more sustainable energy future will define their long-term success. For 2025, the challenge for NOCs will be clear: how can they navigate the uncertainties of today while building a foundation for a sustainable, competitive future? Their ability to adapt, innovate and lead will determine not just their long-term success, but the future of global energy security itself.
By Anne Britt Høydal, Segment Director Governments & NOCs at Rystad Energy
Source: Oilprice.com