Oil and Gas Industry: 2022 In Review and Predictions For 2023

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2022 in review

Though many anticipated 2022 would represent another step away from the uncertainty and volatility of the oil and gas industry under COVID-19, the year still managed to pack a few surprises, while also offering a number of opportunities. The escalating international conflict and subsequent easing of zero-Covid restrictions impacted supply and demand, with oil and gas free cash flows rising dramatically in response. Let’s look deeper at the core events underpinning these financial results. 

Fall In Demand  

With demand dropping sharply in 2020 during the height of the pandemic, it seemed that oil demand and consumption would be back on track in 2021. However, Forbes noteed that by the latter half of 2021, the upward trend had stabilised. It then began to drop again in 2022, partly due to China’s renewal of strict COVID-19 protocols and rising interest rates limiting people’s spending power. China has since relaxed its restrictions, which may very well lead to a rise in demand, though oil and gas markets are still reacting cautiously to this recent development

OPEC Drops Output 

OPEC reported a November drop in production, which was precipitated by the wider OPEC+ alliance’s agreed ‘steep output cuts’. This pledge was in response to the ‘worsening economic outlook and weakening prices’ and sought to lend support to the market. The logic here was that supply-side reductions would drive up prices, following their peak and subsequent fall in June 2022. This decision was met with reproach from President Biden, who suggested the US would investigate ways to further limit OPEC’s ability to control oil prices. 

Conflict In Eastern Europe 

Though not part of the official OPEC coalition, Russia is part of OPEC+, the group responsible for curtailing oil production in the latter months of 2022. While the conflict between Russia and Ukraine limited Russia’s oil production, losing them one million barrels per day, Russia also faced further supply constraints. This was due to the oil embargo imposed on them by the European Union in December 2022 and a G7 price cap, which also eventuated in December. Meanwhile, other countries globally have banned oil imports from Russia. 

2023 outlook

Looking to the future, Deloitte’s 2023 Oil and Gas Industry Outlook Report reflects a positive perspective, despite a particularly unpredictable 2022 when it came to economic, geopolitical, trade, policy, and financial factors. 

Looking Upstream And Downstream 

Though 2022 end-of-year figures are still being finalised, a glance at Deloitte’s projections towards the end of last year suggested free cash flows of approximately $1.4 trillion would be achieved by year-end, the highest amount ever recorded. The allocation of these cash flows is a source of ongoing interest, with speculators wondering if shareholder payouts will continue to receive priority or if companies will instead choose to increase their hydrocarbon reinvestment rate. 

Turning downstream, refineries are coming to terms with falling demand and the looming spectre of a global recession in 2023, albeit a shallow one. US-based refiners are expected to prioritise financial health, operations optimisation, and re-fitting refineries for renewable energy production over increasing core refinery capacity. 

Clean Energy Investment Set To Rise 

Many oil and gas companies will have left 2022 with record-high balance sheets, bolstered by the sharp rise in energy prices during 2022. Paired with supportive political policies, the rising cash flows allowed oil and gas manufacturers to increase their investment in clean energy over the past year. Though this investment is expected to continue into 2023, many factors will influence its extent. These include the relative prices of different fuel types, public opinion on decisions around resource allocation when producing biofuels, and the challenges associated with implementing new clean energy infrastructure projects, particularly in a time of supply chain uncertainty. 

Natural Gas And Liquified Natural Gas (LNG) Gaining Momentum

2023 is expected to bring further investment in natural gas and LNG, particularly certified natural gas and carbon-neutral LNG. This investment will likely also target reducing the greenhouse gas intensity of natural gas and the infrastructure that supports it. In 2022, Europe and the United States announced several policies to support this transition. 

Mergers And Acquisitions (M&A)

Given the uncertain economic environment and the likelihood of a global recession in 2023, M&A within the oil and gas market are unlikely to rise dramatically in 2023, despite projections suggesting record cash flows. Several trends are predicted for M&A in 2023, including a push to accelerate the transition to commercial clean energy technology via joint ventures and alliances, reducing operational emissions through acquiring sustainable assets, and reducing inflationary pressures through vertical integration in the oilfield services sector. Further, natural gas assets and sturdy midstream infrastructure are predicted to be ripe for acquisition, given the leveraging of momentum on energy security. 

Analysis undertaken by Deloitte, whereby a sample of oil and gas executives were surveyed on the conditions they believed were imperative for maintaining the momentum of M&A, identified several key factors. 27% believed ‘high and stable energy prices’ was a significant driver for sustained momentum, while 14% believed ‘production and cost synergies’ and ‘attractive valuations and asset price’ were also essential. 


Over the last year and going into the next, several significant factors have impacted the oil and gas industry, including the fallout of COVID-19 and ongoing geopolitical conflict. These factors have contributed to supply chain blockages, slowing projects and reinforcing the importance of just-in-time supply. Nevertheless, these challenges have provided ample opportunity for investment in cleaner energy sources, a trend set to continue into 2023 and beyond. 

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