More for Asia : Rebalancing World Oil and Gas

The oil and gas industry is set to undergo a decisive transition over the next 10 years as global balances of demand and investment shift towards Asia and away from Europe and North America.These are sectors where geography matters and such a transition will have major geopolitical implications and a profound effect on industrial strategy. Oil and gas companies and their governments also face unprecedented uncertainties over a growing range of issues, including the development of low-carbon policies, shale gas, questions about Iraqi oil production, and surging demand in China.Asia will account for 60% of global oil deficits by around 2030. Its oil demand is already beginning to exceed and outstrip the net surpluses available from the Middle East. Europe will no longer be able to rely on Middle East surpluses to meet its oil deficits. It will instead have to look to Russia as its default supplier of oil, while competing with Asian importers for supplies from areas such as West Africa, Northern Iraq, Central Asia and Eastern Siberia which are pivotal between Asian and Atlantic markets. In contrast to Europe, where falling North Sea production will cause its import dependency to increase, North America's imports of oil are unlikely to grow, as the slow growth in demand for liquid fuels can be met by the expansion of offshore and non-conventional oil supplies.These shifts are likely to alter the character of the global oil market, as Asian markets grow in importance, and investment in increasing supplies from the Middle East, Russia and the ‘pivotal' areas is dominated by state-controlled exporting and importing companies in these markets. In ‘normal times' the diversity and flexibility of international trade provide security both for importers against disruptions of supply, and for exporters against sanctions or discriminatory import policies. In ‘abnormal' times it is the overall political relationship between the governments concerned that is likely to prevail over business investments and contracts – and the sovereignty of governments over their resources is absolute. Given that times are seldom wholly ‘normal' everywhere, companies and governments need to recalibrate their strategies and policies to recognize the impact of Asia's larger share of the world's oil and gas in the future