On the macro front, crude prices were resilient in 2012 despite the extensive volatility that marked the broader markets as a variety of European and US debt crises played out and economists fretted over the sustainability of growth in China.
Will 2013 be a year of fewer crises?
I expect and hope so. Whilst we continue to adjust to the “new normal” of low/no economic growth in the UK and Europe, look out for the US economy surprising us to the upside, and growth in the developing economies continuing to increase.
Along with continued OPEC discipline, this will ensure crude prices remain in a healthy range. Keep an eye on the differential between WTI and Brent which logically should close with the expansion of the Seaway pipeline in the US, thereby alleviating the infrastructure bottleneck at Cushing.
Don’t expect to see turbo charged growth in the oil and gas patch, particularly in the US where the benefits of drilling and completion efficiencies are largely being passed on to the consumers in the form of lower prices, but activity levels are healthy both on land and offshore where there are record numbers of rigs operating.
This is an environment that encourages corporate consolidation that has growth as its reward, so more deals are anticipated there.
The International markets should be good to the oil and gas sectors in 2013 as project activity in all the key international offshore markets continues to ramp up.
The wild cards are Brazil, Australia and the Falklands – how long will they remain “mañana” markets, in terms of delivering on their potential as far as activity is concerned.
On the drilling side of things, international activity is looking good with over 100 wells planned. The areas to watch include Ireland, Gambia, Gabon, Nicaragua, Kenya, Namibia, Peru, Morocco, New Zealand and Vietnam.
The UK is looking good for 2013 with offshore spending at levels not seen since the 1970’s. Just drive round the industrial estates, particularly Kingswells and Westhill to gain insight into the extent that Aberdeen will reap the benefits.
Will this be the year when our City fathers wake up to the reality that the infrastructure and amenities on offer here has fallen way behind what’s needed if the new offices and industrial premises that are shooting up are going to be full of people for the long term.
A dose of imagination, investment and a “can do” attitude would give the city a fighting chance of becoming a place that can compete for talent alongside Perth (Australia), Houston, Singapore, Stavanger et al.
Finally, I suspect 2013 will be a fracking good year for the UK land business now that David Cameron has decided that the process is safe and that it has the potential to lower gas prices and boost UK industry.
Whilst there will be no “UK shale gas revolution” in 2013, expect to see a significant amount of capital committed to the segment not just in terms of investment in acreage (a la Centrica/Cuadrilla), but also investment in the rigs, pumping equipment and the other hardware that makes up a fracking spread.
Nobody can tell today how big the prize from fracking shale in the UK is, but its big, really big! Potentially 100 years of cheap natural gas.
One day the UK will have an energy policy that reflects that economic windfall, but my most confident prediction is that we will not see that in 2013!