The unconventional oil and gas revolution has dramatically changed the global energy landscape, and, in its wake, is altering the world’s competitive manufacturing and industrial panorama, according to a new report from IHS, a source of global information and analytics.
The report, “Energy and the New Global Industrial Landscape: A Tectonic Shift?” is being released for the World Economic Forum 2013 Annual Meeting, being held Jan. 23-27 in Davos-Klosters, Switzerland. The report looks at the impact of unconventional energy (shale gas and tight oil) on world energy markets and the automotive and chemical industries, as well as on the US, where it is improving manufacturing competitiveness.
“Initially, unconventional energy has been – and will continue to be – a big boost for North America,” said Nariman Behravesh, IHS chief economist and one of the report’s authors. “However, other regions and countries with large shale-gas and tight-oil deposits can, with time, also participate in this energy revolution and industrial renaissance.”
IHS estimates that, in the US alone, the surge in unconventional oil and gas extraction has led to the creation of 1.7 million jobs and added $62 billion to federal and state coffers in 2012.
The big drop in energy prices has also led to a surge in investment in the US, posing a risk for Europe and Asia, which face migration of manufacturing to North America and the loss of competitiveness, Behravesh said.
The question of whether the unconventional oil and gas revolution will go global is increasingly being asked by companies and governments alike as major opportunities have been identified around the world, noted Daniel Yergin, IHS vice chairman and a co-author of the report.
“Major opportunities are being identified around the world,” Yergin said. “Our research indicates that the resource base in China may be larger than in the US, and we note prospects elsewhere. However, circumstances that promoted this development in the US differ in important aspects from other parts of the world. It is still very early days, and we believe it will take several years before significant amounts of unconventional oil and gas begin to appear in other regions.”
In addition to these views, the special IHS report includes the following details:
- Predictions that non-OPEC supply growth in 2013 will be 1.1 million barrels per day – larger than the growth in global demand – which has happened only four times since 1986. Leading this non-OPEC growth is the surge in unconventional oil in the U.S. The report warns, however, that increases in non-OPEC supply elsewhere in the world could be subject to what has proved to be a recurrent “history of disappointment.”
- Growth in world demand in 2013 is likely to be about 1 mbd, well below the pre-economic crisis levels. This, according to the report, reflects not only the economic downturn, but also “post-peak demand” in the OECD countries. OECD demand in 2012 was almost 10% lower than the 2005 peak.
- Gary Adams, chief advisor for IHS Chemical, wrote in the report that the North American unconventional oil and gas revolution is having profound effects on the global chemistry industry, with petrochemical investment in North American being reignited. Energy-derived raw materials represent as much as 75% of total petrochemical production costs.
- The uneven global economic recovery will lead to varying impacts and challenge for the automobile industry around the world. China will be at the top, with 20.5 million cars sold in 2013, compared to 17 million in 2010. Recovery is clear in the US, with 15.1 million new car sales in 2013, compared to 11.6 million in 2010 – but still well below the peak of 17 million new cars registered in 2005.
- The continuing impact of the recession is still evident in Europe, where new car sales will be 18.1 million units, below the 18.4 million registered during the downturn in 2010. The same holds true for Japan, with 4.7 million cars sold in 2013, compared to 4.9 million in 2010. Philip Gott, senior director for IHS Automotive, wrote in the report that the global recession has coincided with a global shift toward emerging markets. He added that the oil and gas revolution is only one of many challenges facing the auto industry. Perhaps, Gott said, the most burning issue is that “the consumer’s love affair with the automobile may be turning into a star-crossed relationship.”
The IHS report, “Energy and the New Global Industrial Landscape: A Tectonic Shift?” is available to the public for download free of charge at www.ihs.com/ihsatdavos.