May 2012
IHS ConsultingStrategicAdvisory &TransactionSupport
Rick Chamberlain
Vice President+1 832 428 3544
Rick.Chamberlain@ihs.com
Mark Jelinek
Director+44 203 159 3503Mark.Jelinek@ihs.com
Justin Pettit
Vice President+1 212 850 8552Justin.Pettit@ihs.com
Energy Value ChainInvestment Themesin 2012
The authors gratefully acknowledge the input and assistance of fellow “Energy Investment Themes in 2012” panelist speakers, Kurt Barrow (IHSPurvin & Gertz) and Michael Wang (IHS Herold), plus countless others too many to list from across the entire IHS Research organization; however,any errors or omissions remain entirely our own. The views expressed herein are solely those of the authors.
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Contents
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Executive Summary
In our advisorywork, we havegood visibility onwhere the money isgoingWe see three keyinvestment themesalong the valuechain
While we may not have a better crystal ball than anyone else, in our advisorywork, we do have good visibility on what folks are looking at and where themoney is going. Without betraying any confidences, we have assembled ahigh-level perspective on some of the activity, trends, and outlook that we areseeing in our advisory work along the energy value chain, including upstreamoil and gas, midstream pipeline storage and refining, downstreampetrochemicals, and related infrastructure.We see three key investment themes along the value chain, as follows:1.
We anticipate dry shale gas investments to continue to decline and to be redirected.
Dry gas assets, and even liquids-rich assetsthat are located far from markets, will be acquired to secure supply forpotential LNG export and Gas-to-Liquids (GTL) from Canada and theU.S. Gulf Coast, and for long-term chemical feedstock supply.Companies with large dry gas holdings will continue to search for newbuyers – knocking down the doors of Asian investors.2.
Investment and development continues its movement toward liquids-rich plays.
The activity is swinging toward emerging playswith low entry costs but considerable technical risk. We see much lessactivity for the technically de-risked, but fully priced plays – in theseplays, high costs magnify the execution risks, such as the ability toattract service providers, regulatory risks that may slow projectdevelopment schedule, and escalating drilling and completion costs.3.
Liquids rich plays will drive mid-stream and related infrastructure and services investment.
Production from liquids-rich plays willcontinue to drive significant “ripple-effect” investment in the midstream,downstream and related infrastructure and services. We anticipatecontinued activity in the midstream as play activity and productionoutstrip the current
and
planned infrastructure.This begs questions along two primary dimensions – geography andvalue chain. For example, “where to invest geographically?” (Weanticipate the Marcellus, Eagle Ford, etc.), and “where to invest in thevalue chain?” (We anticipate gathering systems, export, NGLprocessing, deep cut ethane, etc.).
Oil Price Trends
A “Great Revival” in Western crude and liquids production, thanks, in part, toU.S. tight oil production, Canadian oil sands (a.k.a. tar sands) production, andBrazilian pre-salt production, is likely to continue through 2020, moderatingworld oil prices in the 2015 to 2020 period. The chart below illustrates some ofthese new unconventional sources of supply.
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Energy Value Chain Investment Themes in 2012
White paper on real asset investment themes along the global energy value chain in 2012.
While we may not have a better crystal ball than anyone else, in our advisory work, we do have good visibility… (More)
While we may not have a better crystal ball than anyone else, in our advisory work, we do have good visibility… (More)
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