Shale gas will continue to remain a largely regional resource and will have limited impact on global markets over the next three years, says a Deloitte report.
According to the Deloitte Touche Tohmatsu 2013 Oil and Gas Reality Check report, this was because of increased technical challenges and higher development costs of the resource.
Debasish Mishra, Senior Director, Deloitte in India, said, “Although there is lot of excitement globally about new conventional gas finds and also developments in the Shale gas front, it is unlikely to have any impact to improve the gas deficit scenario in India in the near term.”
“We expect Indian oil and gas companies to actively explore investment opportunities globally," added Debasish.
The success of North American shale gas has spurred interest in duplicating the results in other countries. However, according to the report, given the greater technical challenge of shale gas and higher development costs, exploitation of shale resources is not easily replicable in other markets.
While some countries are making progress, over the next one to three years it will remain a largely regional resource with an uncertain impact on the global market past this timeframe, it said.
The study focuses on the primary challenges facing the oil and gas industry including: shale gas, liquefied natural gas pricing, resource nationalism, national oil company expansion, and market complexity.
On LNG pricing, the report says that oil indexation will be one of several pricing approaches for LNG long-term contracts in Asia-Pacific. As diverse supplies enter the LNG market over the next 12 months through to 2017, the dynamics of supply competition will drive transition away from contracts purely indexed to oil prices and at high oil price parity in the Asia Pacific region.
A future mixture of contract pricing approaches: prices set lower from oil price parity, hybrid indexation, and full gas hub indexation.
As regards national oil companies, the report says that these entities are evolving their global expansion by competing for complex barrels. While the global expansion of NOCs is not a new story, the fact that expansion strategies differ between oil and gas is a recent and important development.
NOCs have evolved from players focused on production in domestic oil resources to becoming interested in more complex barrels in unconventional oil, and are also pursuing gas, it says.
The direction in which US medium-size integrated companies, super majors, and NOCs have evolved shows that vertical integration, as the winning business model in the oil sector is far from becoming a market certainty, the report said adding that “Instead, vertical integration largely depends on aligning company strengths and strategy with local and global market conditions.”
Deloitte’s analysis indicates that uncertainty is very much the order of the day. How companies react to and deal with this uncertainty is changing the notion of a singular business model and giving rise to different business models.