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The impact of rising US LNG exports on global markets
August 2018 | Earlier this year, the opening of Cove Point marked a turning point for US LNG exports, placing the US 5th in the 2018 export ranking, and creating major shifts in demand, supply, and pricing dynamics.
Global LNG market dynamics: H1 2018
August 2018 | Our semi-annual overview provides a high-level look at the LNG market during the first half of 2018, comparing current LNG market dynamics with the same period a year ago. We include the biggest importers and exporters as well as the largest contributors to LNG supply and demand.
In full swing: North America’s crude prices and changing takeaway capacity
July 2018 | The first half of 2018 saw crude production continuing to rise in North America. US crude exports are also on the rise, but production growth and constrained takeaway capacity have combined to create a tight market with big discounts.
Permian, we have a gas problem(s)
July 2018 | The Permian is experiencing its first natural gas problem. Gas production is starting to exceed pipeline capacity exiting the Permian, and in-basin prices are falling as a result.
The European electric bus market is charging ahead, but how will it develop?
July 2018 | Widescale adoption of electric buses in Europe is near. There is still a lot of uncertainty around eBus battery charging strategies and the optimal type of charging hardware, mainly related to costs and operational flexibility.
Continued rise of North American shale amid increasing oil prices
June 2018 | As oil prices rise to levels not seen since 2014—primarily as a result of geopolitical risk and production cuts—we expect to see further improvements in the OFS sector and a renewed emphasis on North American shale.
Recovery continues in the OFS sector, but margins stay under pressure
April 2018 | Higher oil prices should see the OFS sector recovery continue, although margins remain under pressure.
Decarbonization of industrial sectors: the next frontier
June 2018 | Though deep decarbonization is possible, it will require substantial investments and big changes to the energy system. Technological breakthroughs, lower energy prices, changing consumer preferences, or new regulations will be critical to achieving this goal.
2018 off to a good start for refiners
May 2018 | First quarter results show that US refiners are generally doing better than the previous year. Markets and assets able to take advantage of growing domestic crude discounts are seeing the most benefit. Overall, this bodes well for a strong 2018.
The EU gas network resilience through advanced analytics
June 2018 | How advanced analytics can help you understand the European gas network system response under demand and supply discontinuities.
5 key questions clients ask about our energy demand outlook to 2050
May 2018 | Our Global Energy Perspective summarizes our energy demand outlook to 2050. Based on client conversations we’ve had since its release, we’re answering five key questions that give more insight into our forecast for the energy transition.
MARPOL 2020: an opportunity for OPEC to reclaim market share
May 2018 | New MARPOL limits on sulfur content in marine fuels could result in 1-1.8MMb/d of additional refinery runs to produce higher volumes of marine gasoil. Such additional crude demand could provide OPEC with an opportunity to reclaim market share.
Medium- to long-term offshore rig outlook: a case for optimism despite shale growth
April 2018 | We expect challenging offshore rig market conditions to continue in the near-term as shale output surges, but longer term, growth prospects are more positive.
LNGFlow April Scorecard
April 2018 | The LNG market has grown by 6-7% y-o-y (primarily driven by China) absorbing most of the expected LNG surplus.
LNG regas terminals: diversification the way forward
April 2018 | The days of LNG terminals as simple LNG regasification facilities could soon be over, with an LNG hub model focused on additional value-adding services, particularly in small-scale downstream, beginning to emerge.
Metal mining constraints on the electric mobility horizon
April 2018 | Cobalt, nickel, and lithium demand for electric vehicle batteries is expected to boom up to 2025 and beyond. Can additional supply, recycling, and new battery technology development prevent raw material scarcities?
5 key signposts that will set the cost of the marginal barrel of oil in the long term
March 2018 | We expect 5 signposts will set the cost of the marginal barrel of oil in the long term: global oil demand, non-OPEC declines, North American shale oil, OPEC production, and new project costs.
What if the latest wind and solar auction results were the new reality of electricity prices?
March 2018 | With ever lower auction results being reported, the question arises: what would the effect be on our power markets if the average cost trajectory followed the auction results?
US natural gas market reaction to the ‘Bomb Cyclone’
March 2018 | In early January, a winter storm popularly known as a Bomb Cyclone caused unprecedented levels of natural gas demand as heating needs rose, pushing gas prices to record highs.
Diesel demand: still growing globally despite Dieselgate
March 2018 | Two years after Dieselgate, the impact of the diesel emissions scandal on final demand appears to be smaller than many expected, and has largely been offset by other demand drivers.
How US LNG may create new pricing fundamentals over the coming 5 years
February 2018 | In 2017, the US exported 12.4 million tons of LNG, a significant increase from the 3.1 million tons of LNG export in 2016. This rise has already begun to change the global LNG flow patterns.
The 2017 LNG market in 10 charts
February 2018 | The total volume of global LNG imports increased by nearly 10% in 2017. Here is a 10-chart recap on global LNG flows and LNG asset utilization rates in 2017.
The 2017 European gas market in 10 charts
February 2018 | Total natural gas imports to the EU increased by 5.5% YoY last year. Here is a 10-chart recap on EU gas flow balances in 2017.
Low oil prices could support longer-term deepwater comeback
February 2018 | As the supply of oil from sanctioned conventional projects dries up and legacy field decline rates accelerate, investment cuts are likely to lead to a tighter oil market by 2020-21 and a supply gap of 13-16 MMb/d by 2030.
Proppant demand outlook for the Bakken and Permian
February 2018 | North American proppant demand is up from 45 million tons in 2016 to 110 million tons in 2018. This will be beneficial for suppliers and drive low-cost sand flooding into the Permian.
Can carbon prices fire up gas demand in electricity generation?
January 2018 | What effect will carbon prices realistically have on natural gas consumption and emissions, and how will it vary over time and by location?
MARPOL implications on refining and shipping markets
December 2017 | In 2020, global sulfur limits for bunker fuel will be lowered from the current 3.5% to 0.5%, affecting over 3 million b/d of residual fuel oil (resid). This will at least initially result in higher refining margins and wider light-heavy differentials.
OFS quarterly: recovery gains pace
December 2017 | A rise in oil prices to two-year highs should further stimulate a recovering OFS sector, despite lower-than-expected activity in US shale.
Will the OPEC output deal get extended?
November 2017 | The future of the November 30th OPEC, non-OPEC output cut agreement will depend on trends in global demand, North America shale supply, and fiscal pressures on participants.
Business as usual for UK gas despite Rough?
November 2017 | The decision to close down Rough will wipe out nearly 70% of the United Kingdom’s natural gas storage capacity, which has played a critical role in ensuring security of supply. What are the broader implications of this closure?
Will a gas market develop in the Caribbean?
November 2017 | Thanks to the growing number of LNG suppliers and advances in small-scale technology, opportunities are arising for oil-to-gas conversions, which could lead to the development of a regional gas market in the Caribbean.
WTI-Brent differential to close as USGC refineries come back online after Harvey and Chinese stock building slows
November 2017 | With refineries returning online and Chinese imports slowing down, it’s likely that the WTI-Brent spread will normalize to USD 1.5-2/bbl over the next weeks.
Energy transition: mission (im)possible for industry?
October 2017 | The Dutch industrial sector can lower its carbon dioxide emissions by 60% in 2040 and by 80-95% by 2050, in line with the EU’s goals, by creating, refining, and applying new processes, technologies, and feedstocks on a large scale.
Global oil markets projected to tighten by 2020-21, driven by decline in projects reaching final investment decision
October 2017 | The global oil price downturn caused a rapid decline in the number of projects achieving FIDs, driving oil market tightening over the next 3-5 years.
New reality: electric trucks and their implications on energy demand
September 2017 | This article explores how fully-electric trucks could capture a significant share of sales as early as 2030 and the impact this would have on energy markets
The LNG market balancing dynamics in 2017
September 2017 | The LNG market in 2017 is clearing thanks to higher demand from emerging and traditional markets but also because LNG production has been lower than expected.
Positive outlook for short-term refining margins amid Hurricane Harvey capacity losses
September 2017 | Hurricane Harvey’s unexpected and damaging impact on the Houston area last week slashed refining capacity and boosted margins, but what does this mean for refining margins in the short term?
OFS quarterly: Is growth taking root?
September 2017 | Higher oil prices early in the year helped the OFS sector recover in Q2 2017, driven by strong growth in North American shale, and the promise of an improvement elsewhere.
The lifting of OPAL capacity restrictions leads to shifting gas flows on Nord Stream
September 2017 | Recent rulings by the European Court of Justice and the Regional High Court in Düsseldorf have increased flows on the OPAL pipeline from Nord Stream to the Czech Republic.
Sub-Saharan Africa continues to depend on inefficient cooking technologies
September 2017 | McKinsey Energy Insights projections show that more than 1.8 billion people (65%) in Sub-Saharan Africa will remain dependent on wood or charcoal for their cooking even in 2050.
Impact of electric vehicles on lubricants demand
September 2017 | As the move to electric vehicles steadily gains speed, there are implications for oil product markets, including light vehicle lubricants, which could see demand begin to fall in Europe and North America by 2030.
How central Oklahoma's SCOOP/STACK shale plays are stacking up against the competition
August 2017 | With breakevens ranging from USD29–43/bbl, Oklahoma’s SCOOP/STACK plays are living up to their reputation as the US’s hottest new area for horizontal development.
Artificial lift in North America onshore: evolution, not revolution
August 2017 | Although the artificial lift segment's exposure to an established base of producing wells allowed it to weather the past three years better than other segments, it faces challenges due to changes in both technological preferences and its business model.
Slide in gas storage margins set to continue
July 2017 | Narrowing seasonal price spreads have been putting gas storage holders exposed to spot prices across Western Europe under considerable pressure, and there appears to be little sign of improvement anytime soon.
China oilfield services: private champions emerge from downturn with global ambitions
July 2017 | The Chinese oilfield service (OFS) sector has experienced hard times since oil price decline in 2014. Many OFS companies have turned to international markets or new business areas to survive.
May 2017 | Some stability returned to the OFSE sector in Q1 2017, with strong US onshore performance offsetting moderate decline elsewhere. However, prosperity has not yet arrived as oil prices went sideways.
Russia’s role in the OPEC supply cut agreement
May 2017 | Following the November OPEC deal to cut production, Russia has pledged to cut 300,000 b/d in H1 2017. We believe both the deal and its possible extension will have limited impact on Russia’s long-term production outlook. This article explores the deal's key limiting factors.
Implications of a border adjustment tax
May 2017 | The US is debating a number of trade and tax proposals, including a border adjustment tax (BAT) that could significantly affect both crude and refined product markets. The most likely impact of a BAT would be higher crude and product prices for US markets.
Turkey’s floating LNG imports deliver cheaper gas and energy security
April 2017 | Turkey’s new floating storage and regasification unit (FSRU) will alleviate strain on seasonal imports and enables the country to diversify its sources of supply.
Navigating the frenzy: 4 ways the Permian is leading US upstream M&A
April 2017 | The Permian took the lead in US upstream M&A in 2016, with deals amounting to fivefold the sum of those in the Eagle Ford and Bakken. A closer comparison shows that the rise of the Permian is not coincidental.
Preserving the downturn’s upside
March 2017 | Plummeting prices forced oil and gas companies to get serious about rising production costs. They have. Now the challenge is to preserve those gains.
Indonesia: a new El Dorado for Independent Power Producers in SE Asia
February 2017 | A comparison with other countries reveals that the percentage increase in power capacity from 2014 to 2025 is the highest for Indonesia (~156%), higher than that for India and China.
There's no quick fix for a Bakken drilling rebound
February 2017 | Operators are moving back into the Bakken, but how will the budding recovery affect drilling in the formation?
Brazil's investment environment: does the reward outweigh the risk?
February 2017 | Brazil is trying to transform into an attractive market to both upstream and downstream investors—and success is likely despite challenges.
The role of gas demand creation in absorbing upcoming LNG supply surplus
February 2017 | LNG demand creation opportunities may be the answer to a developing global LNG supply glut over upcoming years.
Energy 2050: Insights from the ground up
January 2017 | How will the world satisfy its need for energy? McKinsey Senior Partner Scott Nyquist weighs in on the global energy landscape to 2050.
The rise of trading houses in the LNG world
January 2017 | Over the last 10 years, the LNG market has doubled in size and moved from long-term trade to spot sales, tenders, and gas benchmark-linked trade, along with an increase in re-trades and destination swaps.
Evolving capabilities in an evolving LNG market
January 2017 | ‘Short-termism’ is growing in the LNG market, driving both LNG buyers and sellers to consider how their capabilities need to evolve to compete successfully in such a market.
What slowing additions to refining capacity will mean to the industry
November 2016 | While refining capacity additions will be lower than expected, increasing complexity in the global refining system presents opportunities for refiners, traders, suppliers, shippers, and the EPC industry.
As gasoline demand booms, don’t sleep on diesel
November 2016 | In 2015, gasoline-diesel differentials favored gasoline for the first time in many years, but the longer-term future favors diesel, and meantime refiners need to be able to swing between the two.
Next wave of LNG capex to fall short of recent highs
November 2016 | Due to fewer projects that require construction and a drive toward a reduction in development costs, we may see the next wave of LNG capex peaking at a fraction of this decade's spend, posing a variety of challenges for LNG stakeholders.
Meeting localization expectations of Saudi Aramco's IKTVA program requires rethinking the oilfield services value chain
October 2016 | The IKTVA program presents challenges for oilfield services companies serving in the Middle East.
Decoding the US refiner’s exposure to RINs
October 2016 | Renewable fuel credit prices have been high in 2016 for US refiners. Evidence suggests much of this cost passes through, but market volatility and a lack of transparency may mean refiners are still exposed.
What does the future hold for offshore drilling? Four feasible market scenarios
May 2016 | By identifying feasible market scenarios, rig owners can position themselves to respond appropriately when oil prices recover and the market starts to turn. So what are these potential scenarios – and the influences driving them?
Oil outlook to 2019: OPEC's role
October 2016 | The most recent OPEC provisional deal to constrain production could be pivotal in rebalancing of the global oil market, but the details are yet to be clarified. This article examines the impact of OPEC’s course of action on the path to oil price recovery by 2019.
Why has light tight oil production proven so resilient in the Permian?
September 2016 | The Permian basin has been extraordinarily resilient in the face of crashing oil prices due to a combination of operators' financial health and high resource upside, making it the leading growth engine for the US LTO industry.
Regional refining margins: 2016 update
September 2016 | 2016 is proving to be a worse year for refining margins than 2015 across all regions. This article examines the factors driving margins on a regional level in Asia, Europe, and the Gulf Coast.
Oil production capex: is a rebound in sight?
August 2016 | Global oil production capex recorded 11% p.a. growth between 2010 and 2014, hitting an all-time high of ~USD520 billion before the oil price crash. 2 years on, capital expenditure has declined by more than 60% to an estimated ~USD200 billion in 2016.
OPEC meeting ends in disagreement, but market rebalancing still on track
June 2016 | The OPEC meeting in Vienna ended with a decision to stay firm to the current strategy and take no further actions towards directly intervening in the market
The drivers of global energy demand growth to 2050
June 2016 | Structural changes in the energy market are dragging down growth in demand, while a drive towards a lower carbon future, changes in consumer behavior, and technological innovation are shifting supply emphasis towards renewables.
The outlook for crude: a thought experiment
June 2016 | As the last 12 months have demonstrated, the energy sector is highly susceptible to market forces. Changes in GDP growth, further instability in oil prices, and an acceleration in the adoption of new technologies could all impact the outlook for the industry long-term.
Murky waters for offshore rigs: offshore drilling market overview and projections
June 2016 | Our infographic looks at offshore rig demand with projections to 2030
How many more LNG projects can the market handle?
June 2016 | The global LNG market is long, with supply exceeding demand and may be long until the middle of the next decade. Yet there is still a long list of liquefaction projects that are hoping to enter the market in the coming years. The question is, will they ever be built?
Can the global gas market rely on pent-up Asian demand?
November 2015 | Gas market forecasters agree that Asia will continue to be the main driver for global gas demand until 2030. China, India, Pakistan and ASEAN look set to account for more than 90% of total new volume demand over the next 15 years.
Quarterly Perspective on OFSE: Q1 2016
May 2016 | The first quarter of 2016 proved to be the toughest so far in the prolonged downturn for the oil & gas industry. Operator capex fell sharply, taking OFSE sector revenues with it. Margins also fell as companies downsized to fit the smaller market and control costs.
Impact of gasoline and diesel subsidy reforms: India case study
May 2016 | With the fall in crude prices, a number of countries have begun to remove fuel price subsidies. This has resulted in a significant reduction of governments’ fiscal burden and impacted supplier competitive dynamics.
Doha non-deal not expected to affect timing of market rebalancing
April 2016 | Non-deal in Doha will have a short-term impact on prices but limited long-term implications on the rebalancing of the market.
Low oil prices pushing offshore rig owners towards innovation
April 2016 | In the face of declining revenue and maturing debt amidst low oil prices, struggling drilling rig owners are innovating to increase liquidity by using new operational and financial solutions.
US crude exports ban lifted: the implications for crude pricing
February 2016 | At the end of 2015, the US congress fully liberalized exports of all grades of US crude oil, removing obstacles to market based flows and pricing. In this insight article, we examine the implications of this liberalization for crude pricing.
New LNG markets to carry future growth in demand
February 2016 | While stagnating demand in traditional LNG markets may indeed be today’s reality, new and recently opened LNG markets are key to the growth in demand that producers will be hoping to see in the coming years.
A shift in light/heavy differentials: magnifying margins for complex refiners
February 2016 | In the last six months, the pricing of residual fuel shifted to a lower pricing relationship versus crude. This demand-driven shift, if sustained and coupled with a rise in global crude prices, could result in growing margins for refiners.
Europe’s stagnant gas market—where does the opportunity lie?
January 2016 | Of the world’s gas markets, Europe appears to be the tightest in terms of commercial opportunity in the next few years, as a slowing of demand coincides with low prices and supply surplus.
The Global Gas Market to 2030: Four Big Questions
November 2015 | Our infographic explores the four big questions posed when forecasting the global gas market to 2030.
Refining Capacity Outlook to 2020: 2015 Developments
November 2015 | The latest results from the McKinsey refinery capacity additions survey indicate that net refinery capacity additions continue to be high in comparison to history.
LNG outlook: what price will gas pay for the low cost of oil?
October 2015 | The outlook for LNG over the next 15 years looks to be a game of two very different halves. Short term, new infrastructure projects and export routes will satisfy the marketplace and move towards price convergence.
Mexico’s oil hedges for 2016
October 2015 | Mexico’s Ministry of Finance started hedging some of its 2016 oil output this year to safeguard oil revenues that accrue to the government. The hedge took place through purchases of options to sell its Maya crude and Brent—at a cost of $1.09 billion in options premiums.
Changing crude slate for Asian refiners
October 2015 | The Middle East is set to increase its crude exports to Asia by more than 2.5 million barrels per day by 2025 as Asia's dependence on out-of-region crude increases and domestic crude production falls.
Are refiners prepared for a reduction in Russian heavy feedstocks?
September 2015 | Refiners have benefited from heavy feedstocks from Russian refineries but a combination of factors will likely reduce these exports leaving refiners dependent on these volumes with a business challenge
Giant gas field discovery in Egypt likely to impact global gas markets
September 2015 | The discovery of a super-giant 850 bcm natural gas field in the deep-water Sohar basin offshore Egypt will have strategic implications for Egypt, the Eastern Mediterranean region and the global LNG market.
Quarterly Perspective on OFSE: Q2 2015
August 2015 | Although June saw some proclaim the bottom had been reached and it was time for activity increases, the recent oil price decline has increased cautiousness about future spending.
European gas-to-power: 5-year low in gas prices insufficient to power gas renaissance
August 2015 | The European power market has seen a sharp drop in the utilization of gas-fired capacity, with gas prices in 2015 falling to a five year low, some observers anticipated a gas-to-power renaissance.
Iranian comeback and its implications for short-term oil prices
August 2015 | Now that Iran, the US and other members of the international community have reached a deal to end sanctions, Iran is once more free to export oil as it sees fit.
Testing the waters: US condensates exports take off
August 2015 | Growing supplies of US condensate have resulted in a supply glut and deeply discounted prices, but is there an opportunity there?
Impact of Groningen cap on European natural gas markets flexibility
July 2015 | Upstream flexibility has been declining in the North West European natural gas markets since the turn of the century and recent further limiting of the Groningen natural gas fields’ production will only accelerate this process.
Brownfield expansion projects will reconfigure the US LNG market
June 2015 | With the first wave of US LNG export facilities coming online early 2016, there is renewed interest in the potential LNG export volumes from North America.
Despite low oil prices and a weak medium-term outlook, LNG has a bright future
June 2015 | There is the need for ~15 new LNG trains by 2025 and over double that by 2030. Players should look past the structural loose market in the medium term and push ahead with FIDs for this growing market.
Offshore floating rigs – from bad to worse
May 2015 | Sustained low oil prices, further project delays for non-economic reasons, and a freeze in exploration spending are hitting the offshore rig market
Impact of low crude oil prices on refining
February 2015 | The recent fall in crude oil prices has coincided with both higher and lower profitability in the downstream sector, depending upon which region one considers. Here we look at the impact by region.