The obituary for oil and gas was written prematurely. While demand growth is slowing, the world still runs on hydrocarbons. However, the business model has changed from “Drill, Baby, Drill” to “Cash is King.”
Shareholders are no longer rewarding production growth; they are demanding dividends and buybacks. This has forced oil majors into a period of extreme capital discipline. The exploration budget is tight, and focus has shifted to “short-cycle” assets like shale, where production can be ramped up or down quickly in response to price signals.
The smart money in this sector is on methane abatement. With strict regulations now in force, companies that sell technology to detect and plug leaks are essential partners to oil majors trying to maintain their “social license to operate.”