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 (NYSE: IHS), a leading 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 in Davos-Klosters, Switzerland where IHS is a strategic partner. It looks at the impact of unconventional (shale gas and “tight oil”) energy on world energy markets, the automotive and chemical industries as well as on the United States where it is improving manufacturing competitiveness.
While unconventional energy has been “a big boost” for North America, IHS Chief Economist Nariman Behravesh, one of the report’s authors, says its impact will also eventually be seen more widely as other countries develop their shale gas and tight oil resources.
“Initially, this has been – and will continue to be – a big boost for North America,” Behravesh says. “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.”
A new study by IHS estimated that in the United States 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 United States, posing a risk for Europe and Asia which face migration of manufacturing to North America and the loss of competitiveness, says Behravesh.
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, according to IHS Vice Chairman Daniel Yergin, also an author of the report.
“Major opportunities are being identified around the world,” says Yergin. “Our research indicates that the resource base in China may be larger than in the United States, and we note prospects elsewhere. However, circumstances that promoted this development in the United States differ in important aspects from other parts of the world. It is still very early days and we believe that it will take several years before significant amounts of unconventional oil and gas begin to appear in other regions.”
Other key points in this special IHS report include:
- The paper predicts 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 United States. The report does warn, 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 percent lower than the 2005 peak.
- “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,” writes IHS Chemical Chief Advisor Gary Adams in the report “Energy derived raw materials represent as much as 75 percent 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 United States, with 15.1 million new car sales 2013, compared to 11.6 million in 2010 – but still well below the 17 million peak registered in 2005.
- The continuing impact of the recession is evident in Europe, where new car sales will be 18.1 million units, below the 18.4 registered during the downturn in 2010. The same holds true for Japan, with 4.7 million cars sold in 2013, compared to 4.9 in 2010. “The global recession has coincided with a global shift towards emerging markets,” writes IHS Automotive Senior Director Philip Gott in the report. He adds that the oil and gas revolution is only one of many challenges facing the auto industry. Perhaps the most burning issue is that “The consumer’s love affair with the automobile may be turning into a star-crossed relationship.”
The special IHS report, Energy and the New Global Industrial Landscape: A Tectonic Shiftis available to the public for download free of charge at www.ihs.com.