Home / Oil & Energy / Oil & Companies News / Should upstream investors prepare for bolder fiscal policies in 2021?

Should upstream investors prepare for bolder fiscal policies in 2021?

What’s ahead for oil and gas fiscal systems in 2021?

Governments have a lot to think about in 2021. Tougher fiscal terms could put countries at the sharp end of the energy transition – but support for upstream sectors could also remain a priority, particularly after a year of economic disruption. The key to tackling competing and even contradictory pressures may lie in bolder, more radical policies.

Will fiscal policymakers implement radical change in 2021? Fill in the form to read Global upstream fiscal systems: 4 things to look for in 2021 in full. Or read on for a brief introduction.

Tougher upstream fiscal terms are on the horizon

Fiscal policy and the energy transition will be closely linked in 2021, as governments take the opportunity to rebuild in the wake of the global pandemic and accelerate net zero goals. There will be incentives for renewables and the next wave of technologies – including hydrogen, CCUS and energy storage – and increased pressure on fossil fuels.

Throughout the coming year we’ll be watching for carbon pricing developments. Major energy companies already factor carbon price assumptions into new investment decisions – but few countries have firm policies in place. We also expect tougher fiscal terms as governments that set ambitious decarbonisation goals may opt to wind down their upstream sectors altogether.

Where do we anticipate progress on carbon pricing? How will corporate strategy influence policymakers? 

The prospect of radical change

Not all governments will want to kill off upstream investment just yet. For many, particularly in developing countries, the development of resources, provision of energy, government revenues and local employment are still a higher priority. Nevertheless, fiscal frameworks must be fit for purpose.

Investor capital is scarce and the 2020 oil price crash hit company finances hard. The criteria for investment decisions has tightened. Governments responded with few changes in 2020 – in the midst of a global pandemic attentions lay elsewhere. Only Norway introduced meaningful measures to support its upstream sector in the aftermath of the crisis.

In 2021, attractive fiscal terms will be more important than ever for explorers. Without them, the offer of new licences could be a hard sell for some countries. And it could also be a last throw of the dice for some governments to ensure existing resources are commercialised as the energy transition accelerates.

Where might we see bold changes in fiscal policy in 2021? How will fiscal incentives link to green objectives? And what other themes will we be tracking closely in the year ahead? 
Source: Wood Mackenzie

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping