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2023 oil and gas industry outlook

Investing in the future of energy

The oil and gas (O&G) industry earned record profits in 2022, providing ample cash flow to fund their strategies in 2023. And while O&G companies recognize geopolitical and macroeconomic uncertainty in the year ahead, they’ve also been given a clear mandate to secure supply in the short term while transitioning to cleaner energy in the long term. Our 2023 outlook explores five trends that can help shape the path forward for O&G companies.

Kate Hardin
Amy Chronis
John W. England
2023 Oil and Gas industry outlook
1 MB PDF

Illuminating new possibilities

 

While the oil and gas industry isn’t new to supply disruptions and price volatility, the situation today is unique. A confluence of economic, geopolitical, trade, policy, and financial factors have exacerbated the issue of underinvestment and triggered a readjustment in the broader energy market. As a result, all three components of a balanced energy equation—energy security, supply diversification, and low-carbon transition—are now facing a “trilemma” of concerns.

Although the immediate impact of this imbalance is high energy prices and record cash flows for O&G companies, how and where the industry will invest in the future remains uncertain.

The O&G industry will likely enter 2023 with its healthiest balance sheet yet and with continued capital discipline. The positivity of this situation is reflected in our survey, in which 93% of O&G executives state they’re positive about the industry in the coming year. This momentum could help companies overcome the energy underinvestment of recent years and help enable an accelerated energy transition. Explore the five trends below that will likely influence the direction of the industry over the next 12 months.

Five oil and gas industry trends to watch

 

Healthy balance sheets create opportunities for oil and gas

By practicing capital discipline and focusing on cash flow generation and payout, the global upstream industry is projected to generate its highest-ever free cash flows of $1.4 trillion by the end of 2022 (at an assumed annual Brent oil price of $106 per barrel). Now all eyes are on upstream companies to see if they will continue to prioritize shareholder payouts or increase their hydrocarbon reinvestment rate, driven by the urgency to provide affordable energy to the world.

New policies expected to accelerate the clean energy transition

Supportive policies, in combination with higher O&G cash flows in 2022, have enabled O&G companies to increase investment in clean energy. While this investment is expected to continue increasing, several factors could influence the pace of investment or shift the clean energy focus over the next 12 months

New policies and investments could boost the role of natural gas in the clean energy transition

Increases in natural gas investment are expected in 2023, including investments that reduce the greenhouse gas intensity of natural gas and its related infrastructure. In the United States, more natural gas is being produced with a view to reducing carbon and methane emissions and exporting incremental supplies, especially to Europe. Certified natural gas and carbon-neutral LNG are expected to continue increasing momentum in 2023.

 

Refiners respond to shifting energy demand

In the coming year, refineries could grapple with weakening demand, recession worries, and a projected 1.6 mbpd increase in global refining capacity. Notably, US-headquartered refiners are not expected to increase core refining capacity as they prioritize financial health, optimize operations, and convert refineries to produce renewable fuels.

Deal-making reflects wider trends in the market

While projected record cash flows and renewed interest in resource industries bode very well for O&G M&A, capital discipline and an uncertain economic environment will likely keep M&A in check in 2023. According to our survey, 27% of executives highlight high and stable energy prices as key to sustaining the M&A momentum in 2023.

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Get in touch

Kate Hardin

Deloitte - Global
Kate Hardin, executive director of Deloitte’s Research Center for Energy and Industrials, has worked in the energy industry for 25 years. She leads Deloitte’s research team covering the implications of the energy transition for the industrial, oil, gas, and power sectors. She has served as an alumni expert at Yale’s Center for Business and Environment, and she is also a member of the Council on Foreign Relations.
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Amy Chronis

Deloitte - Global
Amy Chronis is vice chair, the US Energy & Chemicals leader, and the managing partner for Deloitte’s Houston practice. Chronis has more than 30 years of experience serving public and private enterprises from emerging businesses to Fortune 500 companies, with a focus on the oil & gas, chemicals, technology, and manufacturing industries. Chronis served as Deloitte’s US lead relationship partner for one of the world’s largest integrated oil and gas companies, as well as other Houston enterprises. In addition to her Houston practice leadership role, she is the US lead relationship partner for several international Energy & Chemical companies.
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John W. England

Deloitte - Global
John is the Global Energy & Chemicals leader across all businesses, including consulting, risk and financial advisory, audit, and tax services for Deloitte Global. John develops and executes on the sector’s overall strategic direction and go-to-market strategy leading 15,000 person team across multiple geographies. He has led successful projects and relationships at some of the largest energy companies in the world more than his 30 years career. Prior to taking over his global industry leadership role, John led the US Energy & Chemicals practice as well as the US Energy Resources & Industrials practice. He previously led the energy trading and risk management practice for Deloitte. He started his career in audit and brings the added perspective of having led the audits of many large energy companies. John is a frequent speaker on energy industry issues, as well as energy trading and risk management having been interviewed by several tier one media outlets and has appeared before boards, audit committees, and industry groups. John serves on the National Petroleum Council and served on the Board of Directors for the Southeast Texas chapter of the Alzheimer's Association for 6 years and now co-chairs the Houston Alzheimer’s Walk. He also serves on the board of Career Spring, a not-for-profit dedicated to helping first generation college students, and the Houston Chapter of the World Affairs Council. A graduate of Stephen F. Austin University where he received a Bachelor of Business Administration in Accounting, John is a Certified Public Accountant in the state of Texas.
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