On January 4th, the Financial Times published an article by Jamie Smith titled "Five Trends Dominating the Energy Industry in 2024". The full text is excerpted as follows.
BP and Statoil ASA have cancelled contracts to sell electricity from large offshore wind projects to New York State, indicating that high costs will continue to plague the industry. As a key region responsible for suppling global oil and gas, the Middle East is still heavily-encumbered by regional tensions. But it is not all doom and gloom. Here is detailed introduction to the five new trends in the energy industry in the coming year.
1. Oil prices shall remain stable despite fluctuations
The oil market has been tumultuous in early 2024. Brent crude oil closed at USD 78.25/barrel, up more than USD 2/barrel. The explosion in Iran highlighted the ongoing tension in the Middle East region. As the persistent geopolitical uncertainty, especially the potential escalation of the conflict between Israel and Hamas, means that fluctuations in crude oil prices will continue, most analysts believe that bearish fundamentals will limit price increases.
Most importantly, there are no postive factors based on global economic data. The unexpectedly strong oil production in the United States helps to curb prices. Meanwhile, the internal strife of OPEC+, such as Angola′s withdrawal from the organization last month, has raised doubts about its ability to maintain oil prices by reducing production.
2. More potential M&As
In 2023, a series of huge oil and gas transactions were successively reached. While a deal worth $60 billion was signed between ExxonMobil and Pioneer Natural Resources, Chevron and Hess reached $53 billion in transactions, and Western Oil and Krone Rock reached $12 billion in transactions.
3. Ongoing renewable energy development trend in spite of difficulties
While high borrowing costs, rising raw material prices, and licensing challenges will have an impact on the renewable energy industry, we are expected to see new records in project deployment in 2024.
As the International Energy Agency forecast in June 2023, it is expected that over 460 gigawatts of renewable energy projects will be installed globally by 2024, setting a historic record. The US Energy Information Administration predicts that wind and solar power generation will surpass coal-fired power generation for the first time in 2024.
Solar energy projects will drive global growth, with an expected annual installed capacity growth of 7%, while the new installed capacity of onshore and offshore wind power projects will slightly decrease compared with 2023. According to data from the International Energy Agency, as the majority of new renewable energy projects will be deployed in China, it is expected that China will account for 55% of the total installed capacity of the world by 2024.
4. The industrial recovery in the United States will accelerate
After signed in 2022, the Inflation Reduction Act has prompted the United States to invest heavily in the construction of new clean technology factories. However, the American manufacturing industry is now going through a very difficult time. The prosperity of the manufacturing industry coincides with a labor market in short supply and high raw material costs, which may lead to factory delays and capital expenditures higher than expected. Whether the United States can accelerate the construction of clean technology factories at competitive costs will be a key issue in the implementation process of the industrial return plan.
5. The United States will reinforce its leading position in the liquefied natural gas sector
Based on preliminary estimates by analysts, the United States surpassed Qatar and Australia to become the world′s largest producer of liquefied natural gas in 2023. Bloomberg data shows that the United States exported over 91 million tons of liquefied natural gas throughout the year.
In 2024, the United States will strengthen its control over the liquefied natural gas market. If everything goes well, the current daily production capacity of approximately 11.5 billion cubic feet of liquefied natural gas in the United States will increase, thanks to two new projects launched in 2024: one in Texas and one in Louisiana. According to analysts from ClearView Energy Partners, three projects reached critical final investment decision-making stages in 2023. Nearly six more projects may be approved in 2024, with a total production capacity of 6 billion cubic feet per day.