Energy & Natural Resources (ENR)

Oil & Gas

Deals Activity: Moderate

Restructuring Activity: Very low

The sector continues to be buffeted by global economic headwinds.

Deals activity in Oil & Gas

1. Recent quarters have seen a marked decline in volumes, but volatility is accentuated by a relatively small number of deals done in the sector.

2. We're yet to see if government policy changes on North Sea and fracking will lead to an uptick in UK deal activity.

Restructuring activity in Oil & Gas

Russia's invasion of Ukraine, and the subsequent sanctions placed upon Russian energy assets, constrained global supply. This resulted in sharply increased pricing across 2022, which in turn, has created excess profits across the sector.

Wholesale prices are trending down at the time of writing, though some volatility remains around the availability of US shale gas and potential OPEC supply reduction.

Despite recent work to build short-term production, transportation and storage capacity, the long-term trajectory towards a move to Net Zero is likely to build momentum.

Oil & Gas

The oil and gas sector has been at the coal face of global headwinds. The pandemic, the war in Ukraine and an economic slowdown have served to swing demand and pricing between historic highs and lows.

At the time of writing, growth in oil demand is gradually slowing, balanced in part by increased switching where possible between gas and oil as a fuel for electricity generation. This global picture is mirrored in the UK, where demand for petrol remains 10% below pre-COVID levels. Prices remain strong, however, due to control on output by OPEC+, as well as various output issues across the world.

The situation with gas is much more complex. The war in Ukraine, and resulting economic sanctions with Russia, has served to materially constrict supply, especially to Continental Europe. This has forced global gas prices to historic levels, generating record profits for producers.

As a result, the immediate picture for the sector is unclear, with a range of countervailing forces impacting supply and demand. The desire for oil-producing nations, such as the UK and US, to improve energy security may well support the sector in the short-term, with greater exploration and drilling than previously envisaged.

Longer term, the transition to net zero is likely to remain a defining feature of the sector’s outlook. It presents opportunities for those across the sector to repurpose skills and capabilities into delivering green energy productive capacity, from offshore wind farm construction to the development of synthetic fuels and carbon capture technologies.

The sector will almost certainly see a wholesale transformation over the next three decades, but opportunities remain to pivot effectively into a sustainable operating model.

Find Your Expert

James Fagan is Interpath Lead for the ENR sector, which includes Oil & Gas as one of four core segments. Matt Little leads our approach to Oil & Gas nationally, with support from Geoff Jacobs on the Oilfield Services sub-sector. For a full list of our senior people with experience in this area, use the button below.

Our senior team