New Year, a review of challenges and opportunities.
January 08, 2020
As we begin 2020, we at Q2 Technologies® want to wish you the best while also helping you meet your goals, get more for your barrel and making sure we continue to offer the best in H2S removal. Whether it is logistic savings, safer working conditions, or environmentally sound products, we are here for you.
While no two years are ever alike, we found that 2019 brought some unexpected challenges which will continue to push oil producers to be creative and responsive. We know that 2020 will also require flexibility and quick actions from actors in the oil and gas industry.
China – US Trade War
There are two old challenges that the oil industry will continue to face during 2020: One challenge is the on-going trade war between the United States and China where oil exports from the US pay a 5% tariff since last September. More than 30 states stretching from Florida to Alaska suffered double-digit drops in merchandise exports to China through September of this year. Sales to the Asian nation fell 39% in Texas, where oil and gas products comprise the largest export to that country.
Furthermore, future growth and investment perspectives for 2020 can be lower because of said trade war. However, the first phase of a trade deal between the United States and China is expected to be signed on January 15th. The additional tariffs on Chinese goods that were to take effect December 15th did not take effect and it is expected that tariffs will be reduced while China would make substantial additional purchases of US goods and services in the coming years. President Trump suggested that energy products would be among them. US Trade Representative Robert Lighthizer said China has pledged to increase imports from the US by more than $200 billion over the next two years.
For US oil producers, it continues to be important to track how the trade war evolves and to maintain a competitive position. It is necessary to preserve the markets that have been developed as we have become exporters. Q2 Technologies® helps in this effort with injection services at terminals, pipelines, storage tanks and during loading and off-loading of vessels to eliminate H2S and bring the oil to specs.
Oil & Gas are the top export from Texas to China
Unstable Middle East
The other old challenge is the unrest and uncertainty in the Middle East region considering the attacks on Saudi Arabia during 2019. 2020 has begun with a very complex situation given the tensions between the United States and Iran. Tankers are at risk and oil coming from other regions might have a larger demand. Oil producers might continue to find rising shipping costs while oil price will be fluctuating amid uncertainty. Increased shipping costs hurt domestic producers. We can help you with our Pro3® so that you can get more for your barrel by removing H2S efficiently.
Political upheaval in the Middle East and elsewhere does not impact oil supply security in the same way as before thanks to the growing US production. US shale growth and exports are influenced by world demand and the varying conditions faced by suppliers. For example, oil prices would skyrocket and climb above $100 per barrel if Iran moved to completely cut off the Strait of Hormuz, energy analysts told CNBC on Wednesday.
Elevated geopolitical tensions have sparked fears of a widening conflict in the Middle East, with energy market participants increasingly concerned that the fallout could soon disrupt regional crude supplies. We expect that the global oil supply security will be maintained even in the face of serious security risk in those regions and that if prices jump, they will stabilize quickly. Therefore, we emphasize the importance of planning for a continued demand at relatively stable prices for American oil.
US Election Year
The US election cycle plays a role in the economy and particularly, in the energy industry. Lower oil prices have been a part of the economic pitch to voters for president Trump. It has been noticed that Saudi Arabia’s push for a production cut this month might be related to an understanding of reducing output as more optically challenging in a US election year.
Some candidates have criticized the industry and its operations, including fracking and pipelines. A few are courting votes by promising to shut down core elements of the industry’s infrastructure. Companies need to navigate this climate of political uncertainty.
For oil producers, the push for lower oil prices during electoral times brings the always important need of getting more for your barrels to the forefront. Q2 Technologies specializes in helping to upgrade barrels, provide safety and protect assets. Our chemistry can help you get more and move your barrels to optimal market. Contact us today to discuss how we can help you.
Environmental policy linked to Climate Change
While oil and gas continue to be of paramount importance for the world economy and the current civilization, there is an increased awareness of the need to get serious about climate change. The largest European producers are being pushed to try to find cleaner business lines and transition to new energy technologies.
Fossil fuel demand is widely expected to peak around the midcentury, but there is not a clear consensus about when. Some forecasts project combined oil, gas, and coal consumption to plateau by 2030, whereas others do not see a peak until after 2050.
The energy transition is a long-term trend, but we have seen a greater focus on this in 2019, which we expect to gain momentum in 2020. Decisions made now can help companies to better position themselves for the decades ahead, to thrive by anticipating disruptive change rather than reacting to it too late.
During 2020 and for the decade that we are starting, it will be important to invest in research and development and to bring to market cleaner technologies within oil and gas, including CO2 sequestration and water recycling in fracking operations. We at Q2 Technologies® pursue the advancement of scavenging technologies bringing to market the best alternatives for H2S removal.
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