Energy industry heading for recalibration, Shell Midstream Partners chairman says
The energy sector is recalibrating to a “new normal” in wake of the oil price slump and it will not be all plain sailing, according to Curtis Frasier, Chairman of the board of Shell Midstream Partners, a limited partnership recently formed by Royal Dutch Shell to own, operate, develop and acquire pipelines and other midstream assets.
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Speaking at the Baker & McKenzie Oil & Gas Institute in Houston, Texas, USA, Frasier said, “It has been a struggle for the industry to readjust. Reduction in oil prices has made hoarding cash a significant concern for companies in the near term.
“It has resulted in the kind of operating expenditure cuts we are currently witnessing, mainly in the form of staff reductions and contract management. Nonetheless, companies must work to preserve high return human capital.”
Bringing Shell’s recent takeover of BG Group into focus, Frasier said long and near term pressures are very different. Shell has announced capital and operating expenditure cuts of its own but proceeded with the £40bn headline grabbing takeover of BG.
“The takeover offers a case in point, because it is a long term play on natural gas by Shell; very different from both the industry’s and Shell’s own near term concerns,” Frasier said.
Looking to the future, the Shell Midstream Partners Chairman said it would be a case of a tussle between two alternate scenarios.
“The first slant points to a world where government policy will have a lasting impact on the way forward, including an emphasis on nuclear and renewable energy. The alternative view points to an energy mix shaped by market forces and civil society, and oil and gas would continue to hold their own in an evolving energy mix.”
The US Energy Information Administration recently opined that fossil fuels will continue to supply three-fourths of the world energy mix by 2040, a point Frasier concurred with.