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The oil downstream - Our perspectives on the future of integration - EY - Global

The oil downstream: vertically challenged?

Our perspectives on the future of integration

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We see rising pressure from sustainable energy demand growth in the developing world but not in the advanced countries. This may cause a geographic shift in demand.

The risk profile of the oil and gas sector is on an upward trajectory, both from an upstream and downstream perspective.

As a result of these industry trends and developments, we see continuing pressures on the sector’s existing integrated model, with those pressures arising from:

  • Sustained and sustainable energy demand growth in the developing world; thus, a geographic shift in demand
  • Volatile and higher prices; increasing consumer sensitivity to higher prices
  • Implicit or explicit retail price controls in many developing countries, spurring demand growth
  • Tighter product specifications and mandated fuel efficiencies, reducing demand growth
  • Rising maintenance and environmental costs; potentially high carbon constraint and/or avoidance costs
  • Rising power of the NOCs, resulting in a need for new IOC/NOC partnership models and, notably, a need to recognize some NOCs as new international, integrated companies
  • Aggressive NOC capacity expansion and slow IOC closure of marginal capacity.
  • Advantaged new refining capacity.
  • Growing supply of non-refinery-based liquid fuels, some mandated or incentivized.
  • Heightened risk profiles, both upstream and downstream.

Contact one of our oil and gas professionals today to learn more about how we can help you.

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